A frightening picture

From the Economist via Immobilienblasen. This long term trend in the UK vs. other retail housing markets certainly sheds some light on the BOE Special Liquidity Scheme, although it is worth noting that the incentives to originate bad loans were never anywhere near as bad in the UK as in the US.

Some very quick thoughts on the Bank's scheme:

• Is it big enough? £50B feels intuitively too small. Probably it needs to be two or three times the size to have a real impact. More experienced hands than mine are also not convinced: see for instance here for Bloomberg on Charles Goodhart's reaction.
  
• Are the haircuts too penal? Probably.
  
• Finally I still believe it would have been most helpful for these swaps to be assignable. That is, once a bank swaps MBS for gilts, it should be able to sell the MBS with the swap still in place, with the buyer having the obligation to repurchase the MBS at the contractual maturity of the swap and deliver gilts. This would help to liquify the MBS market by allowing them to trade with financing in place.