Think America is having a nice housing crash? Just wait, England will have one for the ages

If what goes up must come down, then England, which has much further to fall than the US, will land with a bang heard 'round the world. It's not a question of if, it's a question of when.

Get ready world for Housing Crash, Brit Style.

Here's a great column in The Observer. I especially like the point that the central bank must raise interest rates not just to fight inflation but to send a message to would-be housing speculators that yes, housing prices can and do crash. Because home prices will keep going up and up and up and up unless, like a bad doggy, someone gets a spanking.

The crash is coming and it could be soon - The Bank of England must act decisively and swiftly to curb the current house price madness

It is crazy and it defies logic. The continuous rise in house prices over the last five years has become one of the facts of British life. It divides the generations: parents often sit on hundreds of thousand of pounds of equity propped up by their children's willingness, as first-time buyers, to incur mortgage debt on a scale never before dreamt of. It has made millionaires many times over of those who have plunged into the buy-to-let market. We are obsessed by house prices.

The risk of history repeating itself is known, but too few people believe it. Not the clubs of four or five young people 'co-buying' in order to have a chance of getting into the housing market. Not the wave of buyers of flats that are bought speculatively either to be let or which just stand vacant (and which now constitute one of the prime drivers of demand). Seventy percent of the 20,000 flats built in London last year were bought by buy-to-let speculators.

Neither they, nor those who lend the money, appear to be concerned that prices will fall. Cheltenham and Gloucester has just decided that it will finance small buy-to-let borrowers to buy up to nine properties rather than the three at present. The Bank of Ireland, according to the Financial Times, has just raised the maximum it will lend to any one entrepreneur by eight times - from £2.5m to £20m. It is risk-free lending. It may be that the yield from rents is lower than the costs of borrowed money, spelling disaster, but as property prices only rise, nobody worries. It is stories like these that prove we are in a bubble.

House prices are now six times average incomes - 20 per cent higher than before the calamity of the early 1990s - and forcing ever higher amounts of mortgage and bank lending, which, in turn, push up inflation.

The bank has to act decisively on Thursday and give an unmistakeable signal of its intent. It should raise rates to 6 per cent. If it does not, it will only have to move them even higher next year because it bottled out of acting pre-emptively.

It has to break the folklore that the only direction of house prices is up.

So be cautious. Don't take out an extreme mortgage at the top of the market. Don't feel sympathy for the distress about to hit the buy-to-let market and the lenders who recklessly fed the fever. But do ask hard questions about how our financial system is managed.