Warning on house prices; PROPERTY: Householders feeling pressure of debts.
THREATS of a housing "boom and bust" should not be dismissed amid rising personal debt and risky lending by some mortgage firms, a report claimed today.
Market analyst Datamonitor said the market's "outstanding" performance in 2006 and almost double-digit house price inflation had renewed fears of a subsequent crash.
Issues such as high consumer debt, increased interest rates and a riskier approach to lending adopted by some sub-prime mortgage providers could seriously impact on the future of house prices in the UK, research suggested.
The report predicts that the UK mortgage market will continue to grow slowly over the next five years, with total gross advances by lenders rising by 2.6 per cent a year.
Karina Purang, financial services analyst at Datamonitor and author of the report, said: "Datamonitor does not believe the housing market is on the road to a house price crash, mainly because the economy remains healthy, but the threat of a boom and bust cycle is still present.
"A number of issues such as high levels of personal debt, averaging pounds 4,522 per person, could have a considerable impact on the future performance of the mortgage market.
"Such buoyant housing activity cannot be sustained in the longterm and, undoubtedly, house prices cannot keep going up forever."
The report noted that many households are feeling the pressure of high levels of indebtedness and this had started to feed through to mortgage repayments.
In addition, hikes in the interest rate introduced by the Bank of England to curb inflation are likely to further burden consumers, particularly those with too much debt.
This could impact hardest on sub-prime mortgage holders, targeted at homeowners with poor credit ratings.