UK house market warning
The International Monetary Fund (IMF) has said there is the possibility of an “abrupt correction” in the UK housing market.
The IMF made the case for gradual increases in interest rates to safeguard against deleterious effects on indebted households vulnerable to higher borrowing costs.
But the organisation forecast better-than-expected global economic growth for this year and next.
In its latest World Economic Outlook, the IMF predicted growth of 4.6 per cent for 2004 up from 3.9 percent last year.
It also predicted 4.4 per cent growth for 2005.
The UK economy is expected to expand at twice the rate of eurozone countries during 2004.
The Washington-based IMF forecasted economic output in the UK would stand at 3.5 per cent this year with the growth slipping back to 2.5 per cent in 2005.
Growth in the eurozone on the other hand was estimated to grow 0.6 per cent by 2005 from its current 1.7 per cent level.
Chancellor of the Exchequer Gordon Brown has set growth for 2004 at three per cent and 3.5 per cent in 2005.
The IMF said global recovery “strengthened and broadened” in the last six months, partly boosted by growth in several Asian countries, especially India and China, and the US, but this could act as a drag on key housing markets as interest rates, unemployment and reduced disposable income were likely consequences.
Feverishly bulging house market bubbles in Britain and Australia could impair future global economic growth if burst, the IMF noted.
