More rate rises will hit housing market, warns Countrywide

Countrywide, the UK's largest estate agency, added to the growing concern over the possibility of further interest rate rises yesterday, warning another increase will dampen the housing market.

Countrywide, the UK's largest estate agency, added to the growing concern over the possibility of further interest rate rises yesterday, warning another increase will dampen the housing market.

The company's comments follow the stark views of Mervyn King, the Governor of the Bank of England, who this week spoke of the increasing possibility of house price falls and interest rate increases.

"Recent rate rises will, we believe, have a dampening effect on the residential property market," a statement from Countrywide said.

But in an attempt to calm panic over a potential crisis in the housing market, Countrywide, which owns the Bairstow Eves chain, said a sharp correction in either the volume of house sales or house prices was unlikely.

Countrywide is still benefiting, meanwhile, from the growth in house prices. It said the number of sales in the first half of this year had risen, which, combined with soaring prices, led to record commission levels for the group - some £15m higher than the same time last year.

But further evidence of the high cost of housing emerged yesterday, which showed that given the dramatic rise in house prices, parents will have to contribute an average of £17,000 of their own money to help their children on to the property ladder.

A survey by the Joseph Rowntree Foundation shows this figure rises to £23,670 in the south of England. One in five parents are prepared to increase their own borrowings to raise capital for their children.

Richard Best, the director of the Foundation, said: "Our research has shown how unaffordable starter homes have become across the south of England in relation to local pay for young adults.

"Homes will only become more affordable when we have increased the level of house building in areas where shortages are acute."

The Bank has raised interest rates four times since November and should they continue to rise, homeowners may have to cushion the blow of higher mortgage repayments by cutting back on their leisure activities, such as eating out, gym memberships and holidays.

FPD Savills, the estate agency, has calculated that British homeowners spend about one-fifth of their disposable income on recreation, about double the amount in 1994. It believes this area will be the first to be cut back when increased mortgage payments bite.