My exact sentiments, Ross, but you omit to mention that it was Peter Mandelson who once spoke of the need to dispense with the stigmatisation of debt to drive enterprise through the U.K economy. Now we stand on the periphery of a full-blown economic crisis.

The biggest damnation of all this? One of my former schoolfriends obtained a mortgage over a year ago and lives in a nice new house and was given a personal credit limit of £3,000.

Guess what? He has been unemployed for the last four years with no income, and I have learned since that banks and especially building societies were under pressure to throw plastic and mortgages at everybody- no matter their ability to repay- in order to meet projected profit margins and the F.S.A were too impotent to do anything about it. Now that's sub-prime for you.. .

Hence why I only trust the Germans and Swiss when it comes to looking after my dosh .

Darren, Greenhithe, Kent,

What a great piece! Early intervention by those who claim to understand economics would certainly have slowed this bubble.

I think there have been several factors driving the housing boom as well as those mentioned by others here:
1. the demutualisation of the building societies
2. the government's encouragement of both partners to go out to work - driving the house buying power of a family upwards (but at considerable cost to family life and social responsibility)
3. the usual bandwagon effect on both lenders and borrowers

That same bandwagon will now drive prices back down to sustainable levels - hopefully affordable to first time buyers.

As to the long term, a reversion to the tried and tested mutual (building society) system would not be a bad thing. If you want to avoid boom and bust, that is.

Jim Peden, Dumfries,

Do these demands that lenders pass on recent base rate cuts, amount to another stealth tax?

Apparently the PM and Chancellor actually want to prop up the property market at its current, unsustainable levels.

Do they think it's economically desirable that average houses cost 7-9 times average salaries?

Do they approve of gross distortions in our savings and investment markets thanks to artificially low interest rates (that do not reflect the true price of risk)?

Do they think that lenders should further weaken their balance sheets by cutting interest rates to existing and new borrowers - despite the fact that the rates they they pay in the money markets have risen?

Do they care that this will effectively be mean a new STEALTH TAX on savers (the difference between lower savings rates and money market rates) to pay for this bailout?

Do they think they can buck the market?

Is this really prudent management of the economy - or simply political expediency?

Huw Sayer, Norwich, England

Katie, London

So a recent FTB but it's everyone else's fault is it? How convenient. Irresponsible borrowing by greedy buyers deluding themselves (a) that they could afford it and (b) that prices could only ever go up is just as much a cause of this mess!

Jon Cooper, Herts, UK,

So GB's big idea is that the banks bail out homeowners, then taxpayers bail out the banks.....hmm, really bad if you are a taxpayer and not a homeowner, great if you are a hom eowner but not a taxpayer and just plain silly if you are both.

Tim, London,

Many really good points in this article, I hope the Prime Minister, the chancellor and their banking chums read this at their breakfast meeting. Gordon Brown is trying to patch up a cracking dam with polyfiller, soon the dam will burst and house prices will come crashing down.

Kevin herbert, Greater Manchester, UK

Labour are happy to use our money to improve their chances of holding onto their expense accounts and ministerial limousines. Its the tragedy of the commons as it makes sense for their selfish purposes (getting re-elected) to sell the country down the river by forcing us all to underwrite the bad loans.

Frankly its a crime and someone should start talking about the possibility of prosecutions.

Man in a Shed, Woking, Woking, England

I'd be interested to see any of Ross Clark's articles from 1999 or 2000 which carried the same message as this one.
Again, I think we are seeing circumstances, in part, fuelled and exaggerated through constant media reporting. Being reported each month with such glee, house price rises became a self-fulfilling prophecy until something very out of the ordinary happened. Now we have the self-fulfilling prophecy of house price cuts with estate agents pointing to the media to justify their sales pitch and compound the message, just as they did with price rises.
As in most markets, confidence is a crucial factor in the housing market. Confidence can be driven up or down by constant scrutiny and reporting whether that reporting be balanced and subtle or, as with some we are seeing and have seen, near hysterical.
Be it with football managers, out of form cricketers or the housing market, the media and, to some extent, the public seem to love a bandwagon.

Martin Baines, Worcs,

Well basically, the banks messed up, the credit rating agencies messed up and the FSA messed up too. Usually when something seems too good to be true....it is, and now everyone is paying dearly for these mistakes - some with their homes! Being a recent FTB, I'm not too happy about the prospects, but will wait it out and one day the economy will boom again. I only hope that interest rates don't go crazy in the meantime.

Katie, London,

Labour point the finger at the 15% interest rates that accompanied the Tories problems with negative equity as though that was some sort of commendation, there is going to be crash but at least...Then we have the Government pointing the finger at the banks, they were responsible for being too free with their lending. We still have vast housing projects being mooted in every part of the country and any proposal turned down by local planning officials will find favour with the Government's inspector on appeal, but who will buy these properties? The Oxford University Paper published yesterday spoke of the structural decline of grand old village names and others more obscure. They mentioned the village of Knutton and Silverdale a great example of Klondike building surge and the total lack of infrastructure. That places once belonged to the inhabitants but is now part of the Government's growing estate, piecemeal and without charm; part of the biggest land grab in history.

Malcolm Turner, Alsager, England

One suspects that everyone involved suffered from exactly the same myopia that caused the Opposition to propose at their autumn conference tax changes which, if implemented, would cause an immediate and significant boost to house price inflation - while claiming that their proposals were intended to help, not punish, first time buyers.

Introduce a mortgage on lax terms intended to help first-timers get on the ladder, and the law of unintended consequences guarantees that it will be used by others to pull the ladder up after them. Try to limit this product to first-timers only, and some bright spark will either game you or sue you.

The trick is spotting early enough that you're on a vicious cycle. Not something for which humans have ever shown any aptitude. One is tempted to let the dip (so far 5%, when houses are overvalued by maybe 40%) develop into a full scale crash, if only "pour encourager les autres" - but one also knows the lesson will be forgotten within five years.

Ian Kemmish, Biggleswade, UK

Visited my bank today to enquire over a mortgage. I was offered x 4.5 salary, no arrangement fee and a 5% deposit 'would be good'. Some parts of the market don't seem to have changed.

Martyn, London,

Yes, it would be better if the law limited loans. But why not go further and limit ownership of residential property -who needs more than two homes? And why do we allow individuals or buy to let businesses own vast 'portfolios' of property when this is quite plainly restricting the supply of housing for young people, undermining settled communities and inflating prices? It's quite simple really - homes are places to live in. They are not commodities. Since the Thatcherite policies of the 1980s, subsidised mortgages and the oppression of local government, we have witnessed the creation of a housing 'market' which has subverted traditional concepts of wealth creation with the idea that you can get wealthy just by sitting on your sofa. Radical change is needed - reasonable controls, greater public investment in good quality rental accomodation for those who need it, better planned cities, higher wealth taxes, and people working together to use their brains to create and re-invest wealth.

don craigton, wakefield, u.k.

I agree completely with your points Ross. When I was looking to move up to a larger house back in 2000, I was shocked to discover I could borrow 5 times income. I think over time this irresponsible lending could only cause bidding-up of house prices akin to 'boiling a frog'.

The problem is how to end the speculation in housing that can be so damaging to our economy and daily lives.

I think the coming crash would be a great opportunity for the government to abolish council tax and introduce Land Value Taxation. The country desperately needs bold legislation to end this worsening cycle of boom and bust.

LVT would end the speculation in housing once and for all and free us to create real value for ourselves instead of focusing on imaginary wealth.

Lee Pedder, Luton, UK