[SMHarman]

The problem a recession leads to in housing is not as either of you put.
Negative equity in a property is only a problem if you need to move. Negative equity will prevent that move until the market improves back to the level you bought at.
This means a lack of mobility. Say you lose your job in Bristol and find a new one in Newcastle, however you can't easily accept it as this will mean selling up in Bristol to move to Newcastle and that has the acompyning headache of the negative equity that you cannot afford to realise.

High interest rates are not a requirement for recession or a cause or effect. In fact in recession interest rates are often found to be lower as this discourages spending and makes investment more affordable for companies and borrowing cheaper for governments.

Interest rates are a very blunt tool for managing an economy though, it takes a good while for a change in interest rates to filter through the conciousness of the population and change their habits.