The corporate debt structure shifted from bank towards bond financing during the Great Recession of 2008-09. This substitution was significant in the Euro Area and the United States, and it coincided with a historic collapse in the housing market. In this paper I study the role of house prices fluctuations in the observed shift in corporate debt structure. I built a dynamic stochastic general equilibrium (DSGE) model with a banking sector and financial markets in which house price shocks force constrained consumer to repair their debt while unconstrained consumers increase their precautionary savings. This in turn affect banks’ balance sheet and generates the observed shift from bank finance to bond finance. This substitution was an important valve to buffer the impacts of the bank crisis.