The fall in the savings ratio: the role of housing

<p>The growth of consumer spending in 1987 and especially in 1988 took the macro forecasters by surprise. There has been a dramatic collapse in the personal savings ratio as borrowing has surged. The borrowing has been dominated by loans for house purchase and has coincided with a major house price boom. It is tempting to conclude that we have witnessed a classic bubble in which an increase in share prices, makes owners of those assets feel wealthier and increases both the demand for and supply of further loans.</p>