Technically we had an inflation rate below 3%, but only because house prices were excluded from the inflation figures. Mortgage payments were probably most working people's single biggest payment, yet the huge rises in those costs (as house prices increased) didn't go into the inflation figures. If they had, then inflation would have been well above 3% and interest rates would have had to rise, dampening the housing market. I can't help but believe that governments were happy to exploit the electorate's belief that they were doing well financially, when in fact it was an illusion.
House prices will have to fall by about 50% (the figures for the UK look pretty similar to that USAToday presentation). People were prepared to take on ridiculous loans when the bubble was being inflated, because they thought they would be unable to afford property if they waited.
In fact, the situation in the UK sounds like it might have been worse than in the US. There were significant numbers of 110% mortgages available in the UK until a couple of years ago.
The BBC did an expose in 2003 showing that major banks were encouraging customers to lie about their income in order to be able to buy property. Yet this expose has been buried, never to be mentioned. The government and the financial regulators did not want to know.
The median salary for a graduate in London is £24,000; the median price for property is £335,000.
I have friends who came from working-class families who were still able to buy houses when they were students back in the 1970s.