When the bubble bursts, and agents are overburdened with a high level of debt, the interest rate tends to loose its effectiveness as an instrument to smoothen consumption and income. This is particularly the case when the assets that agents hold against their debts are not very liquid.
A lowering of interest rates is unlikely to be effective in raising the value of the assets or in inducing agents to increase their borrowing and thus consume more. The anticyclical effectiveness of monetary policy tends to be impaired. This issue tends to be underestimated in the literature, although it is widely recognised in the case of fiscal policy.