Alan Greenspan’s warning that US house prices could fall significantly has fuelled concerns that a bubble has also developed in the UK property market. This week’s data releases will provide an update on the housing market on both sides of the Atlantic and an initial opportunity to assess the impact of recent financial turmoil on consumer and business confidence.

Growth in UK house prices will slow further in the Nationwide’s survey, due on Thursday. The year-on-year rate is expected to slide from 9.6 per cent in August to 8.6 per cent in September. However, higher interest rates have had little impact thus far on mortgage borrowing and only limited success in moderating house price inflation. UK households were spending almost 12 per cent of their income on mortgage payments (interest and principal) in the first quarter. Disposable incomes look set to be squeezed further, and with the savings rate at its lowest since 1960, consumers have very little in reserve. Although UK policymakers may follow the example of the US in cutting interest rates, housing demand is expected to weaken as mortgage rates will rise in response to higher money market rates.