Bank of America has warned that Britain could face a “nightmare scenario” as collapsing house prices combined with tighter fiscal policy. A report by the bank said that “skyrocketing house prices” had enabled consumers to draw down “staggering” levels of mortgage equity for spending. But the “multiplying” effect of the boom was running out under the delayed impact of earlier rate rises. “We cannot rule out a nightmare scenario in which a decline in consumption caused by a sudden correction in house prices would lead to an explosive rise in the fiscal deficit that would have to be addressed by a tighter fiscal policy,” said the bank. Though the bank did say it still believed a “soft landing” was most likely for the housing market. (Telegraph)