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Britain’s homeowners were warmed yesterday that last year’s property boom resumption is raising the threat of a slump.
The International Monetary Fund, based in Washington, USA said that rising wage demands and inflation could force the Bank of England into a fourth interest rate increase.
That would put families' finances under significant pressure, and create even greater risks for property prices.
It said in the report, published on its website: "The near and medium-term outlook is for continued strong and stable growth with a return of inflation to target.”
"A number of directors considered, however, that vulnerabilities, including those associated with high housing prices, warrant vigilance."
A house price crash would be doubly disastrous for the Chancellor, the report concluded, since it would also have a knock-on effect on the public finances. The report said: "A sharp drop in house prices could lead to a slowdown in economic growth that would increase net public debt relative to GDP by about three percentage points."
The report was positive on Britain's economy over the past decade. However it also indicated that the coming decade may not be so prosperous and warned that the housing market bubble remains one of the biggest threats to the UK economy.
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