The current slowdown in the housing market could turn into a crash if unemployment continues to increase, say analysts.

This is the warning given by the Council of Mortgage Lenders' Director General Michael Coogan in an interview with Reuters the news agency.

House prices in the UK have been ramped up by falling interest rates and low unemployment and with the threatening turn-down of employment there is a real risk of slowing in the housing market into a crash, taking the whole economy with it.

Because of soaring house prices, first time buyers are being squeezed out of the marketplace and this, along with slowing house building could also tip the balance, sending the housing market into a crash.

Most analysts have been arguing a violent crash is unlikely since the ratio of earnings to borrowing is not as high as the early 1990s when thousands of Britons lost their homes or were forced into negative equity after property prices collapsed.

However figures out this week showed unemployment in May rose for the fourth consecutive month and this hasn't happened since the last big crash. This appears to have given Coogan enough of a jolt to raise the issue again although he pointed out that currently we continue to have more jobs being created than are being lost.

But, he warns, “there is a debate whether they are the right sort of jobs for the people who are made redundant."

Despite the warning, CML’s central forecast is that house price inflation will be down at five percent by the end of 2004. And Coogan was cool about the economy as a whole saying, “I don't think there is going to be significant worsening of unemployment levels, certainly not in the two-year projection we are looking at."