Take a look at Slides 1,3,5,6,8 and particularly 14 in this presentation by McKinsey. It is clear that as a percentage of GDP the UK is one of the highest leveraged economies in the world (- only Japan comes close):
Whilst Banks have deleveraged, it is clear that a lot more deleveraging has yet to take place – particularly households and commercial property in the UK.
Slide 14 rates the UK has a high probabality that deleveraging will take place:
Given that most of the leveraging has been caused by mortgage debt, this is the area that needs to be addressed and that’s not good news for house prices.
To see the full presentation by McKinsey:
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