IT IS a forecast to make the blood of British homeowners freeze in their veins. A no-deal Brexit, as might yet occur given the chaos surrounding the British government’s negotiating strategy, would see house prices fall by a third within three years. That is what Mark Carney, the governor of the Bank of England, is reported to have told cabinet ministers discussing the issue on September 13th.

It seems unlikely that this was actually an explicit forecast, however. More likely, it was a reference to the Bank of England’s stress test for the financial sector, which examined the effect of such a decline on the balance-sheet of banks. But a fall on such a scale is certainly not impossible, judging by the fundamentals. Nationwide’s house-price index shows that, for first-time buyers, house prices are around the highest, compared with incomes, that they have been in 35 years. In London, houses could fall by half in value and still look pricey in historic terms. Our recent house-price index suggested that London prices were 59% overvalued relative to income. Back in February, we calculated that overall British house prices were 29% over-valued compared with incomes, and 48% overvalued relative to rents.

House prices have hit these historically high levels because interest rates have been low for a long time. Servicing a mortgage is still quite cheap by past standards. Nationwide also publishes a housing-affordability ratio for first-time buyers, based on the proportion of take-home pay absorbed by mortgage payments; the current level is slightly below the 35-year average. Past house-price setbacks were preceded by moments when affordability became stretched, in 1989 and 2007.

So how might a big fall in house prices occur in practice? One possibility would be a rapid rise in interest rates, perhaps in the context of a run on the pound after a breakdown in the Brexit talks. But the Bank would have to think twice about tightening monetary policy in such circumstances, as the British economy would be suffering from a shock.

A greater risk might result from financial distress. A no-deal Brexit could cause some combination of job losses across the country and in London, a slump in foreign demand and a glut of unsold properties as European citizens, uncertain of their status, headed home. If that, in turn, caused widespread defaults, banks might cut back on mortgage lending. With few willing buyers and many forced sellers, the clearing price for houses could fall sharply.

For people aged under 40 who have struggled to afford a house, falling prices might sound like good news. But if such a slump is accompanied by rising unemployment and a credit squeeze, they will be in no position to benefit. Be careful what you wish for.