http://www.nytimes.com/2007/08/24/business/24home.html?ex=1190088000&en=993a4da6482b7a5d&ei=5070This article is a bit dated (from 8/22/07), but it shows the possiblity of a housing bust in the UK. Only 5% of Britons take out fixed-rate mortgages!
"LONDON, Aug. 22 — Susan Whittaker was desperate. Four years ago, she purchased her first apartment in the town of Rochester, less than two hours east of London. But then interest rates started to rise, and the income from the small shop she ran with her partner no longer covered their adjustable-rate mortgage.
In British society, “we encourage people to take on debt,” said Frances Walker, a debt adviser.
Facing foreclosure, and determined to avoid moving in with her mother, Ms. Whittaker found a way out in an increasingly popular arrangement here known as a “sale and rent back.”
A private company bought her home, allowing her to avoid foreclosure; then the company rented the house back to Ms. Whittaker and her partner and they did not even have to move.
The catch is that the company paid the couple less than the value of their apartment.
Such deals are uncommon in the United States, and mortgage brokers say they discourage them because of the possibility of unscrupulous and dishonest lenders exploiting distressed homeowners.
But desperate times call for desperate measures. While Americans fear an epidemic of foreclosures, brought on by the subprime mortgage meltdown, Britain is already suffering one.
Foreclosures here are at an eight-year high; lenders have repossessed a record 14,000 properties in 2007, 30 percent more than at the same time last year, according to the Council of Mortgage Lenders. An additional 125,100 households are behind in their mortgage payments.
And personal bankruptcies are at an all-time record, caused largely by a crushing increase in mortgage debt. The situation has grown so dire — as has the threat of desperate homeowners being exploited — that the newly installed government of Prime Minister Gordon Brown is trying to change the fundamentals of the mortgage system.
Whether they can is an open question, especially given Britons’ attachment to home ownership, adjustable-rate mortgages and personal debt. British consumers are the most indebted citizens of any Group of 7 nation, and television shows devoted to real estate and debt advice are among the most popular programs in the country.
“We live in a society where we encourage people to take on debt, and there is lots of pressure to get your foot on the housing ladder, which has proven quite a fruitful investment for some,” said Frances Walker of the Consumer Credit Counseling Service, a debt adviser, in London.
Currently, only 5 percent of British home buyers take out fixed-rate mortgages. The norm here is a mortgage with a fixed rate for the first two years, and then a floating rate for the duration of the mortgage.