One in 10 households 'in financial stress over debts'

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The Independent Online

A leading housing body called yesterday on the Bank of England to raise interest rates as an independent report showed that one in 10 households was suffering financial stress because of debts.

In a rare move for the property sector, the Royal Institution of Chartered Surveyors said a rate rise this week would prevent the need for more later.

"The recovery of the economy this year has exceeded all expectations, the stock market is at its highest level for over five years and there has yet to be any noticeable impact from the August rate rise in the economy or the housing market," Milan Khatri, its chief economist, said. He said the experience of 2003 and 2004, when house price inflation came close to 30 per cent, was that it took several rate rises to "take the heat" out of the market.

The report came as a survey showed that house prices in London's most desirable postcodes were rising at their fastest pace since the peak of the 1980s' property boom that ended with a devastating crash.

Knight Frank, the estate agents, said prices in "prime" central London areas such as Notting Hill rose 2.1 per cent last month, taking the annual growth rate to 24.8 per cent - the highest since June 1988. But it said the surge in prices did not mean the capital was heading for a crash.

Two separate surveys showed a rebound in retail sales and consumer confidence. The British Retail Consortium said like-for-like sales rose at an annual 2.6 per cent in October, up from 2.4 per cent in September.

Nationwide building society said household confidence in the UK picked up in October despite fears of a looming interest rate rise.

Meanwhile, research by Bristol University showed 10 per cent of households were showing signs of financial stress. It said a smaller group - just 2 per cent - admitted they were both over-indebted and struggling to make ends meet.

The author of the report, Professor Elaine Kempson, said as many as a tenth of those suffering stress were "close to the precipice".