Economist warns of higher interest rates

HOUSE prices may increase just 2% next year while the rise in mortgage lending could drop to under 20% from its current record levels as interest rates rise.

Basic rates currently at 2.25% could end this year at 3% and hit 3.5% next year, a leading economist has warned.

The hike in rates would be enough to ease the increase in house prices to 2% next year, said Bank of Ireland chief economist Dr Dan McLaughlin in his address to the National Mortgage Conference in Dublin.