Let me just add a few comments specific to the most important risk discussed in the FSR: the difficulty that highly indebted households would have servicing their debt if they were to face a sharp decline in their incomes or a sharp rise in interest rates. This situation raises the risk that a shock to the economy could trigger a correction in house prices.
The probability of this risk materializing is low, but if it did occur, the effect on the economy would be severe. BIS central bankers’ speeches  1  This risk would be greater if house prices were judged to be overvalued relative to fundamentals.