What caused the Big UK house price crash in the early ninties?

Answer 1

Between nineteen eighty six and nineteen eighty nine house prices rose significantly. I know, because I bought and sold at that time. Chancellor Lawson removed exchange controls allowing foreign banks to enter the British mortgage market. Also, British high street Banks entered the retail mortgage market for the first time. This kick started intense competition with the traditional lenders, the Building societies. Hitherto, there had been controls over how much could be loaned to each borrower, normally 2.5 times salary. Competition drove the multiples up. Another factor which few people are aware of, is that Lenders started to borrow money on the wholesale money market to re-lend to mortgage borrowers. Hitherto, the amount of money available for lending was limited to the amount of money received into Banks/Building societies by their savers.

Now, all these factors came together almost at the same time. Moreover, the base rate of interest had dropped to about 7.5%, whereas, it had averaged about 9.5% for the previous thirty years. If you add to this, the fact that people started to think of houses for the first time, as investments, then you will understand the reason for the house price inflation that followed. Between nineteen eighty six and nineteen eighty nine house priices rose 250%.

It started to crash in nineteen ninety because interest rates rose substantially to 14.5%. That killed its pig until about nineteen ninety six/seven when interest rates started to drop to thirty five year lows. Buy to let was born, interest rates continued to fall, and, as we all know, house prices have been pushed to even more ridiculous levels than in 1990. There is another factor at work, this modern generation has no fear of debt, and, as far as the housing market is concerned, has completely lost any sense of value for money. The correction is coming, and it has already started in America.

Answer 2

In the main it was caused by the policies of Thatcher and peoples greed. Property was the big investment promising ever rising value. However as interest rates shot up people found that instead of buying a property they could comfortably afford they had actually gone to the limit and as a consequence when the crash came their house were worth less than they paid for them. This negative equity and difficulties in keeping up mortgage repayments led to thousands of evictions and repossessions,

Answer 3

Overvaluation and lying estate agents although interest rates probably helped (alongside higher costs all round). It will be the same as what causes the current bubble to collapse; just in slightly different proportions.

Answer 4

Margaret Thatcher.

Answer 5

the boom

a boom is always followed by a crash.

and that's what we may see soon again. accept this time, there will the high flying companies will be in the know and will hang on to their assets and not flog them off like last time, waiting for the market to stabilise.

this will be bad news and it will become every more difficult for first time buyers.

the rich are getting clever, and richer and the poor are getting poorer

Answer 6

The interest rate rise and the boom in building plus Maggie giving council houses away cheap.

Answer 7

It was all to do with the Uk's forced exit from the ERM (exchange Rate Mechanism)

http://en.wikipedia.org/wiki/Black_Wednesday
http://en.wikipedia.org/wiki/Exchange_Rate_Mechanism

Answer 8

It was because i bought a house, I am unlucky in life !!

Answer 9

Margaret Thatcher... and her greedy policies.

Answer 10

When you moved in , property value dropped..