Interesting interview of Gordon Brown by Nick Robinson here, responding to the news that house prices fell in March at their sharpest rate since 1992. Robinson himself comments here.
Brown says that the housing market is "containable" and that policy will help it keep "moving forward". I have no idea what he means by either of these phrases. However, whatever it is, he's probably wrong. UK house prices, which have been extravagantly overvalued and probably should have started falling as early as 2004/5, will fall markedly, and I don't believe there is anything policy can do to prevent this.
The question now is, when house prices fall and the defaults start coming in, how will the losses appear? Obviously some housebuilders will suffer, and some mortgage company profits will not look so good. But the bigger question is - where is the securitized UK mortgage debt? Who will take the losses? Is it the same firms that have already taken considerable losses on US securitized mortage debt? Can they all survive a second round of big losses over the next couple of years? This is the $640bn question...
