The housing market’s current robust state has prompted Savills to stand by its 2007 forecast. According to the Savills February Briefing, interest rates have not yet reached critical levels and property prices are still on track to increase by 7% in mainstream markets and 15% in prime central London and Home Counties country house markets this year.

Savills’ forecast allows for a brief increase in interest rates to 5.25% but does not expect them to push higher. If rates were to go up for a prolonged period, the 2007 conjecture would be revised, admitted Yolande Barnes, head of Savills research. But according to Ms Barnes the UK property market is much less affected by interest rates than people imagine. ‘We do not think household finances are as stretched as conventional housing affordability measures suggest,’ she said. Savills believes there is still a surplus in most UK households that will act as a cushion against house price falls.

Interest rates, Savills predicts, will stay at between four and five per cent in the longer term, in line with money markets. If the markets were to take an unexpected drop, Savills would anticipate a downward adjustment in the value of other assets as well as property. ‘For the UK property market this would probably take the form of a long period of no growth and low turnover rather than the spectacular falls predicted by some,’ said Ms Barnes.