Friday, June 29, 2012

The limitations of ZIRP

What has happened to the UK’s housing, mortgage and banking markets?

Shaun Richards discusses Libor and recent trends in mortgage lending. Note that Richards regards a booming property market as a good thing - he is no HPCer. Regarding mortgage lending trends, Richards observes that if the trend of capital repayments exceeding borrowing in the mortgage market continues while we have ZIRP then we're entering new territory: "This development drives a possible stake into the heart of another economic orthodoxy. This is the one that says that reducing interest-rates always leads to net increases in factors such as borrowing which lead to a stimulus to the economy. My argument is that as we approach zero for interest-rates the relationship changes and that the stimulus declines and can go negative."

Posted by quiet guy @ 08:41 AM (3663 views)
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One thought on “The limitations of ZIRP

  • Net mortgage lending is -£100m. Boom.

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