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tennaval

What Constitutes A Bubble?

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The BOE seem fond of forward guidance when it comes to interest rates, so now they have also been given oversight of the Nation's House prices perhaps they would like to share with us the parameters within which they will control them?

Edited by tennaval

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The BOE seem fond of forward guidance when it comes to interest rates, so now they have also been given oversight of the Nation's House prices perhaps they would like to share with us the parameters within which they will control them?

A bubble is only officially a bubble in hindsight, after it has burst. Up until then it's business as usual.

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When the average person cannot afford the average house without some sort of 'help' scheme to allow it.

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The BOE seem fond of forward guidance when it comes to interest rates, so now they have also been given oversight of the Nation's House prices perhaps they would like to share with us the parameters within which they will control them?

From what they have said, it seems to be to do with frequency of transactions and ZIRP-era monthly payments (not necessarily repayments), rather than prices. So, if houses are sold every two years on average and the interest payment on the average mortgage is half of gross income, they may start to worry.

Q

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A bubble is only officially a bubble in hindsight, after it has burst. Up until then it's business as usual.

Yes you're right.

But given the dissent from many quarters, I think if enough political and media pressure were exerted, they would have to give a statement at least. Which would be interesting, and as far as I'm aware a precedent.....

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Yes you're right.

But given the dissent from many quarters, I think if enough political and media pressure were exerted, they would have to give a statement at least. Which would be interesting, and as far as I'm aware a precedent.....

Why don't we stick to the tried and trusted, decades-old heuristic: 2.5x single income, 3.5x joint? Every time we've deviated from it significantly there's been an almighty bust.

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