Captain Renault at the BIS
Hardly a surprise to many of us here, but always refreshing to hear official mea culpas, however implied the tone. This from a BIS report on world housing finance:
The Working Group noted a number of developments. On the supply side, where the lender structures of most markets remain largely national in nature, common developments include increased loan-to-value ratios, a reduction of credit restrictions, a wider array of loan contracts offered to borrowers, and a move towards greater reliance on capital market funding via securitisation of housing loans.
Together, these developments have made borrowing cheaper and more readily available, which has allowed new categories of households to enter the housing market. In particular, sub-prime lending has increased significantly in countries where it is allowed. On the demand side, a number of countries have experienced a growing willingness on the part of households to assume risk, in particular interest rate risk arising from floating rate borrowing. These developments have been associated with a rise in household indebtedness; house prices have increased in most industrialised and emerging economies, and in many countries housing debt per capita and house prices have reached new all-time highs. However, despite the observed large increases in housing debt, debt service costs have risen more modestly and have even fallen in some countries, compatible with the notion that lower interest rates have played an important role in leading households to assume more debt.