The UK economy and housing market will become direct casualties of the current world-wide credit crunch, according to the latest Regional Planning report by Experian, the global information services company and leading economic forecaster.

Five UK interest rate hikes since mid-2006 were already hitting consumer demand and global developments tighten the squeeze.

"Following an expansion of 3.1 per cent this year, UK GDP growth is forecast to slow to 2.1 per cent in 2008," comments Andrew Burrell of Experian's Business Strategies division.

"The downturn in consumer demand is more abrupt, with demand growing by less than two per cent year-on-year. Only significant reductions in interest rates bring an upturn from 2009.

"We expect the UK housing market to suffer over the next two years. Although national house prices have continued to soar against a background of higher interest rates, the current boom has been uneven regionally. The latest figures show an exceptionally buoyant market in Northern Ireland and continued strength in Scotland and London, but elsewhere there are already signs of deceleration.

"Over the next two years, house prices are forecast to record the lowest annual increase since the mid-1990s (see table), while repossessions are also set to reach 15 year highs. The regional impact is uneven. Modest declines in house prices are predicted in the South East and the East of England, while values fall much more sharply in the South West. By contrast, Greater London, where overvaluation is less severe than in the rest of the south, has the UK's strongest short-term outlook after Scotland."

Despite better affordability and lower indebtedness, the long housing boom has also pushed some regions too far. Notably, the East and West Midlands are expected to see the UK's most significant falls in house prices over the next two years, with property values down about four per cent by 2009. Meanwhile, Northern Ireland suffers a hangover after the dizzy growth of the recent past.