The current financial system’s reliance on debt and asset inflation risks economic and housing stability, worsened by climate impacts. To address this, finance must be reimagined to support the real economy through mortgage reform, separating banking functions, focusing on productivity-driven growth, enhancing social safety nets, and reorienting central banking policies toward sustainability.
The UK’s housing market faces significant risks from climate change, particularly flooding, which could lead to a permanent devaluation of properties. With full-recourse mortgages, homeowners remain liable for debts despite reduced asset values, triggering potential economic contraction. This crisis could exacerbate intergenerational and regional inequalities, impacting middle- and working-class families most severely.
The UK’s financialization creates a cycle where rising household debt underpins economic growth, yet undermines financial security. With stagnant wages and rising asset prices, many households rely on debt for basic participation, exacerbating inequality and financial precarity. This self-reinforcing trap threatens economic stability, necessitating urgent policy intervention.
Finance-led growth is fragile and is dependent on increasing debt to sustain economic activity. Mortgages underpin the system, but as households face flooding risks and economic pressures, the reliance on future borrowing can lead to inevitable crashes, as history has shown, underscoring a fundamentally unsustainable model.
thejoyofrachel 