The 1990s saw the end of a housing bubble and a serious house price crash in the year 1992. Leading up to the housing market crash of 1992, there was a period of economic boom, and corresponding boom in house prices (especially in London and South East). Economic growth reached over 5%, but, at this rate the growth caused inflation to rise to 10%. Therefore, the government felt compelled to start reducing inflation. They felt the best way to reduce inflation was to join the ERM (exchange rate Mechanism). To cut a long story short, the inflation of 10% and membership of the ERM required interest rates to rise very high to 15%. At 15% mortgages became incredibly expensive and so there was a record rise in defaults and home repossessions. People stopped buying and house prices fell by 15% (More in London and South East).
Acquired Source: http://www.mortgageguideuk.co.uk/blog/house-prices/housing-market-crash; New York Times,Feb 18, 1992. Kenneth N. Gilpin
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