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UK interest rates the chickens are coming home

Marxist Analysis · 2026-05-13

Core Argument

The central thesis is that the UK housing crisis is not a cyclical market correction but the product of a deliberate, decades-long destruction of public housing provision by successive Tory and New Labour governments, driven by the subordination of social need to the profit imperative of finance capital. Roberts argues that rising interest rates, far from being a technical monetary adjustment, expose the underlying fragility of a credit-fuelled boom built on household debt and fictitious capital. The chickens coming home to roost are the accumulated contradictions of neoliberal housing policy: the collapse of council building, the privatisation of housing provision, and the transformation of homes into speculative assets. The article claims that the working class will bear the costs of this crisis through higher mortgage payments, falling living standards, and deepening indebtedness, while the state acts to protect the financial system rather than meet housing need.

Theoretical Grounding

The analysis draws on classical Marxist political economy, particularly the distinction between use-value and exchange-value as it applies to housing. Roberts treats homes not merely as commodities but as assets that have been absorbed into the circuit of interest-bearing capital. The argument implicitly deploys Marx's concept of fictitious capital — the idea that financial claims (mortgages, collateralised debt obligations) are treated as real wealth even when they rest on the ability of workers to service debts from wages that are stagnant or falling. The article also reflects the Marxist tradition's critique of the capitalist state: the destruction of council housing is presented not as a policy error but as a class project, pursued by both Labour and Tory governments, to dismantle the social wage and force the working class into dependence on private markets and credit. There is an implicit engagement with the tendency of the rate of profit to fall, insofar as the shift from productive investment (industry, council housing) to speculative financial activity is understood as a symptom of capitalism's inability to generate sufficient surplus value in production. The article sits within the tradition of Marxist crisis theory that emphasises the role of debt and financialisation as both a temporary displacement of crisis and a mechanism for its intensification.

Conjunctural Relevance

The article was written in August 2007, at the precise moment when the subprime mortgage crisis in the United States was beginning to break into open financial crisis. Roberts identifies the specific mechanisms — subprime lending, self-certified mortgages, collateralised debt obligations, the collapse of Bear Stearns' hedge funds — that would within a year trigger the global financial crash of 2008. The UK data is precise: interest rates at 5.75%, household debt at £1 trillion, mortgage costs consuming 44% of average household income, personal insolvencies at a record 107,288. The article notes that 2.8 million families were about to see their fixed-rate mortgages expire, a ticking time bomb. The conjuncture is one in which the credit-fuelled boom of the mid-2000s — rising house prices, cheap credit, financial innovation — is shown to rest on the growing exploitation and indebtedness of the working class. The article also situates the UK crisis within a global pattern of central bank rate hikes across Europe, Canada, Australia, New Zealand, India and China, indicating the systemic nature of the overaccumulation of fictitious capital.

Where the Argument Continues

This article is an early warning shot in what would become a sustained Marxist analysis of the 2008 financial crisis and its aftermath. The argument continues in Michael Roberts' subsequent work on The Great Recession (2009) and his ongoing blog The Next Recession, where he develops the thesis that the 2008 crash was not a one-off but the beginning of a long depression characterised by low growth, stagnant wages, and repeated financial tremors. Within the In Defence of Marxism corpus, the analysis of housing as a site of class struggle and financialisation is taken up in later articles on the UK housing crisis, the Grenfell Tower fire (2017), and the impact of quantitative easing on asset prices. The broader theoretical framework — the relationship between fictitious capital, overaccumulation, and crisis — is developed in Roberts' Marx's Law of Profitability in the 21st Century (2016) and in debates on Against the Stream about the nature of the current long downturn. The article also points forward to the analysis of the 2022-2023 cost-of-living crisis, where the same dynamics of stagnant wages, rising mortgage costs, and collapsing public provision resurface.

Connections

  • Marx, Karl: Capital Volume III, particularly the chapters on interest-bearing capital and fictitious capital, provide the theoretical foundation for understanding how mortgages and CDOs become claims on future surplus value.
  • Harvey, David: The Limits to Capital (1982) and The Enigma of Capital (2010) develop the concept of the "secondary circuit of capital" — the absorption of overaccumulated capital into the built environment. Roberts' analysis of housing as a speculative asset fits squarely within this tradition.
  • Roberts, Michael: The Great Recession (2009) and The Long Depression (2016) extend the argument of this article into a full theory of the 2008 crisis and its aftermath.
  • In Defence of Marxism: Later articles on the UK housing crisis (e.g., "Grenfell: a tragedy of capitalism", 2017) and on the cost-of-living crisis (2022-2023) continue the analysis of housing as a class question.
  • Lapavitsas, Costas: Financialisation in Crisis (2012) provides a complementary analysis of how banks have shifted from lending to productive enterprises to lending to households, creating a new form of "financial expropriation" of wages.

Key Quotes

  1. "The credit-led boom in world stock markets and property prices is now in jeopardy as central banks raise interest rates everywhere."

  2. "The reason is yet another part of the destruction of the public sector and the welfare state that successive governments, both Tory and New Labour, achieved in the 1970s and 1980s."

  3. "Council building is now virtually zero. It was supposed to be replaced by 'social housing' with building by housing associations. But housing associations build only 20,000 a year, the same rate back in the 1960s — and indeed half the rate of the 1990s."

  4. "New home building is now totally dependent on private sector building for profit. And this they have failed to do."

  5. "The destruction of the public sector housing programme by the Tories and New Labour together helped create the housing crisis for the majority."

  6. "The US financial sector has been doing big business laying off these loans to others in batches of debt called collateralised debt obligations (CDOs). CDOs were good business because they incorporate huge fees and they were supposedly backed up by the rising value of property. But now all is turning sour."