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Huge swathes of people would be left owing more money than their property was worth, many would default.
Wouldn't that depend on what proportion of people were looking to refinance their debt?
Your average / modal home owner isn't going to be doing this very often, so provided they are still able to service their existing debt obligations, nothing should really change. For them, loan to value is pretty much a once only problem.
(Assuming interest rates don't go up at the same time...)
Buy-to-let might be a different matter, as the value of the property is an on-going factor of the leveraged finance model. If the value of your rental property drops, the bank may offer less favourable finance, which combined with falling rental incomes (that correlate to falling property prices, even if lagged) don't paint a pretty picture.
IIRC, that's how it's been in the past few house price "corrections", but I guess other models might be different.
NotThamesWater-
going with the original premise of a 10X drop in house price. Assuming I bought a £250k house with 10% deposit, I have monthly mortgage payments of £1,450 and will repay £434k over the mortgage life.
Assuming the house is now worth £25,000, post theoretical crash, it is irritational to keep paying the mortage - I could default and with the money saved by not making mortgage payments be able to buy an equivalent property debt free in two years time.
We can say with reasonable certainty that is what will happen because we saw it happen in Merica post 2008 default, just google Jingle Mail.
So impact #1 banking disaster
Also I suspect it would be pretty ruinous for the building industry and allied trades...
fidbod
Huge swathes of people would be left owing more money than their property was worth, many would default.
Apart from that, it's not a bad thing. However, for that to happen supply would have to outstrip demand so either there would be a mass of new housing stock being built or the wider economic situation is so bad that no-one dares move house.