The governor of the Bank of England has publicly predicted that housing affordability will improve as a result of the credit crunch. Speaking at the annual Mansion House banquet in July, Mervyn King said: “It is clear that the market is severely affected by the reluctance of the banking system to expand its balance sheet further. Banks are adjusting to the fact that many asset markets are unlikely to reopen in their old form and, as they do so, the supply of mortgage finance is being restricted. “Once the adjustment in the financial sector is complete, banks will be able to resume lending. But the era of cheap mortgage finance that underpinned the housing market in 2006 and the first half of 2007 is over, and as a result it is reasonable to expect the ratio of house prices to incomes to fall back, though with real interest rates still low by the standards of the past fifty years, not to previous averages.” <br>