On face value they are but they are artifically kept low. This

was the crux of the whole banking crisis. In the US the economist Ben Bernanke came up with the idea of kick staring their economy by lending money, lots of it and to make it attractive the interest rates needed to be low. Inevitably this money found its way into property where people think that its safest. Obviously this is a very simplified view of what happened but it is something that I do have a bit of knowledge about. The housing market in the UK has effectively been a massive Ponzi scheme which was at its height just before the banking crisis. House prices don't reflect true worth, they reflect how much someone can borrow. Interest rates have to continue to be kept low because if they went up hundreds of thousands of mortgage holders couldn't afford the payments. (The other result of this of course is that savers get sod all in interest). This makes the housing market unique in two ways. Firstly that prices are not subject to the usual economic rules of supply and demand and that (most) people get excited about house prices going up, especially people who using housing as an investment. Can you imagine getting excited about petrol prices rising or food prices rising or cars or bicycles or furniture? No, of course not but house increases yes. Of course those who suffer are the youngsters trying to buy a first property. They've been completely shafted by my generation and its a disgrace.

Posted By: Chopper, Sep 23, 10:50:26