New survey concludes that rising interest rate is not affecting housing market growth

UK house prizes are set to increase by as much as 10 to 15% by the end of 2007, a new survey by Lombard Street Research has found.

The independent microeconomic research group had already predicted 10% growth in house prices this year. The group has now said that recent UK interest rate rises would not crash the housing market.

Group forecaster Diana Choyleva said: "House prices are not overvalued if you look at affordability with interest rates at just 5%. Market momentum will be sustained in the near term and a weaker global economy should stop the Bank of England raising rates more than a quarter of a percentage point in the spring.”

The survey also revealed that a property price bubble may develop but the earliest this is likely to happen is in 2008, and only if double digit growth is achieved, warned Choyleva.

Some economic groups have predicted house price growth at just above the rate of inflation, with Lombard Street's prediction being the highest to date.