Homeowners have been warned to brace themselves for "aggressive" interest rate rises amid growing concerns over the runaway property market.

The Council of mortgage Lenders (CML) warned that, in the worst case, a doubling of rates might be needed to cool rising prices.

It forecast for end-of-year rates of 5.25 per cent was far higher than the 4.5 per cent it predicted in January.

But it pointed out a doubling of the base lending rate was an extreme example of likely action needed as it did not take into account other market factors.

A CML spokeswoman said: "There are always risks but unless there's a nasty trigger somewhere else in the economy, the likelihood is the housing market will run out of steam of its own accord."

The CML said house prices and consumer spending had so far not slowed by the rate it expected in January, despite the impact of interest rate rises in November and February.

It revealed it had raised its expectations for interest rates amid signs from the Bank of England it was becoming increasingly concerned about the refusal of house prices to slow down.

The spokeswoman said: "Although the bank does not specifically target house prices, we believe we have seen evidence of them giving greater weight to the inflationary impact of those increases."

The cost of borrowing rose again two weeks ago with analysts expecting another imminent hike after oil prices increased inflationary pressures and the British Bankers' Association said net mortgage lending rose by £6.4 billion last month, the highest figure on record.

The CML, which represents banks and building societies, said its projection was now for house prices to grow by 14 per cent in 2004, rather than the eight per cent predicted earlier this year.

But demand for home ownership meant it was more likely the UK would see a moderation in the level of house prices.

The alert over mortgage rates came on the heels of a warning last week that Britons were running up a threatening mountain of general debt and now collectively owed £1 trillion in mortgages, loans, overdrafts and credit card borrowings.

Vince Cable, Liberal Democrat treasury spokesman, said: "Our borrow now, pay later culture has resulted in a new milestone for borrowing. The debt bubble facing the British public is truly awesome.

"If interest rates rise as expected, if house prices fall, if oil prices continue to go up and inflation rises, many people could find themselves in difficulty."

Monday May 24, 2004