But houses are no stocks. After all people were living in those houses and I doubt that many people are willing to take negative armotisation mortgages. Even if the house price goes on upwards for some more time, you still have the debt and you can't sell your house without some form of replacement. When your house price goes up so much, then probably your replacement would be expensive, too. So you would  always end up in trouble.
So people look on the loan and what they can pay back and decide. With higher interest strong relative movements are much less likely. The principal to income ratio would be better, the houses would be easier to heat. I doubt as well that there would have been no credit crisis at all, but I would have been smaller.

For complex phenomena there is usually more than one way to influence them. Interest rates would have been one in this case. Mortgage lending regulation another, higher reserve requirements yet another, and there are probably even more. Using more than one measure to reach a goal is usually a good idea.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers