Wednesday, September 12, 2007
Risk of credit crunch reported by BoE last summer
"If the UK's debt bubble bursts, house prices could fall by as much as 25% over three years, the Bank of England warned in its Financial Stability Review. The Bank said a sudden jump in borrowing rates - potentially caused by a further surge in the oil price - could cause a 2% fall in economic output and wipe out a year's worth of bank profits, this year estimated to be £40bn. A sharp fall in credit conditions worldwide could cause a 1.5% contraction of the UK economy, a 25% fall in house prices and a 35% drop in commercial property prices over three years, according to the scenarios mapped out by the Bank."