Housing Market Is Heading for a Fall, Warns Greenspan; Rates Warning: Alan Greenspan

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Byline: Alex Brummer

BRITAIN'S housing market is heading for a painful downturn, according toa world-renowned economist.

Alan Greenspan, the former U.S.

Federal Reserve chairman who advises Gordon Brown, warned of 'difficulties' forhome owners as rising interest rates bring house price growth to a halt.

He said the UK market was in greater danger from the world 'credit crunch' thanthe U.S. because it has a higher level of adjustable-rate mortgages linked tointerest rates.

The bleak warning comes just days after the Bank of England bailed out mortgagelender Northern Rock when it was unable to borrow elsewhere.

News of the emergency loan sparked panic among customers who withdrew anestimated [pounds sterling]2billion in two days, contributing to market worries.

Mr Greenspan, 81, who has also advised President George Bush, said in anewspaper interview: 'There are going to be some difficulties. You're alreadybeginning to see the mortgage rates are moving.

'A lot of the two-year fixes are beginning to unwind, and the teaser rates aregoing.

It's going to turn, it's got to turn.' He also warned that inflation soon couldpick up dramatically and the Bank of England, which has raised interest ratesfive times in the past year to their current 5.75 per cent, may have to takethem into double figures to keep prices down.

Mr Greenspan's comments follow recent signs that the housing market is slowingafter a decade of uninterrupted growth.

But despite his gloomy prediction, he believes the UK economy is in a positionto deal with any problems.

He told the Daily Telegraph: 'You haven't had a taint of a recession for anYoung gambling extremely long period of time, and a good part of that is theflexibility that came out of the crush between Scargill and Thatcher.

'That was the defining moment, and to their credit Blair and Brown did notendeavour to unwind it. They recognised that there was something fundamentallygood for British labour in having a flexible economy. …