London, United Kingdom (PressExposure) March 06, 2010 -- Those expecting house prices to rise in 2010 are likely to face acute disappointment said a source close to "Zen International".
The Asian-based private fund is thought to believe that the Bank of England will have no choice but to raise interest rates once the markets divert their attention away from the problems of the Eurozone and focus on Britain's growing fiscal deficit.
Public borrowing for the month of January hit an unprecedented £4.3bn and represents the first time the government has had to borrow money in that month and highlights the precarious nature of the UK's economy.
If investors decide that they are not confident in the ability of forthcoming plans to reduce the deficit, they will almost certainly demand higher yields to compensate for the increased risk of holding UK debt. This means that the government - and, by extension, the country - will have to pay more to borrow money.
"Zen International" says that this will drive up interest rates in other markets including the mortgage sector and those homeowners already in negative equity and who cannot refinance will find their monthly payments rising significantly higher.
Repossessions are likely to leap leading to a glut of properties on the market.
"Zen International" believes that UK prices must fall another 20-30% before eventually leveling out.