Property prices ‘overvalued’

More interest rate rises are needed to curb Britain’s growing house prices, it has been suggested.

According to the Organisation for Economic Cooperation and Development (OECD), property prices in the country are overvalued by 65 per cent as British house buyers are among the most financially stretched in the world.

The OECD warned that unless the base rate is increased then an economic slump may take place to curb house price growth, reports the Daily Mail.

Meanwhile, the four interest rate rises which have taken place in the last 12 months are reported to have seen annual payments on an average £150,000 mortgage rise by some £1,200.

However, any future rate hikes are likely to further increase consumers’ difficulty to make secured and home loan repayments.

Ed Stansfield from Capital Economics claimed that house prices have risen over the decade due to a shortfall in new property and lower borrowing costs.

He said: "We are in for a very, very subdued picture in term of house-price inflation and housing market activity."

Earlier this week, Martin Ellis, Halifax chief economist, claimed that the Bank of England is certain to raise the base rate within the coming months, which is likely to put further pressure on those struggling to make homeowner loan repayments.

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