UK's property market is the most unappetizing one around Europe. Too prizy for shitty weather. Then the prize of mortages are cheap because of ZIRP ... once rate rise in 3-5 years ... people on median income who wouldn't have been able to afford one otherwise can't afford one now - when rate rise. peoples houses get repossessed and gov with the scheme (gov guarantees 15% of the loan) is having to pay part of the bill. George Bush did the same in his first year as President - subprime was the result.

So if prices are going up, people think that their situation is improving. Happy families make happy voters – and happy voters vote for the party in power. That’s why a massive mortgage subsidy scheme – Help to Buy – has been thrust upon us. And it seems to be working. Prices and sales are rising. [...] Trouble is, interest rates right now are at or near record lows. So mortgage servicing costs are only likely to rise. Ironically enough, it could be an economic recovery that does the damage: a recovery would result in higher rates, pushing mortgage payments up, and making many loans unaffordable. [...] As long as things look good come May 2015, it will happily ignore any potential collateral damage. And the scheme has had an almost-immediate impact. Formally launched in this year’s budget in April, it has already seen sales of new homes surge. The government now plans to expand it from next year.

The University of Chicago’s Raghuram Rajan, a former chief economist at the International Monetary Fund, tells a plausible story in his recent award-winning book Fault Lines about the connection between income inequality and the financial crisis of 2008.
Rajan argues that huge income concentration at the top in the US led to policies aimed at encouraging unsustainable borrowing by lower- and middle-income groups, through subsidies and loan guarantees in the housing sector and loose monetary policy. There was also an explosion of credit-card debt.

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The recent work by Rajan, Stiglitz, Kumhof and Ranciere, and others explains the apparent paradox: those at the very top financed the demand of everyone else, which enabled both high employment levels and large current-account deficits.

PLUS - leverage and low interest rate environment

Stagnant incomes of US households (the 99%) is in the making since 70s. Is this Globalization effect? Playingfield gets leveled?

Jim McTague of Barron’s noted over the weekend that, two months before Obama’s glowing speech, PricewaterhouseCoopers released a fear-filled note in its audit of the company, which has accumulated losses of $558 million in its five-year lifetime. The firm noted that Solyndra “has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, raise substantial doubt about its ability to continue as a going concern.”

Solyndra proved to be a model alright — a model of the wreck Obama has made of fiscal and economic policy, a model of crony capitalism, a model of waste and/or corruption. Solyndra has filed for bankruptcy and laid off 1,100 workers. Before filing for bankruptcy Solyndra blew through the $535 million loan guaranteed by taxpayers’.