Increasing uncertainty over the housing market is likely to lead to slower borrowing and consumer spending this year, research has suggested.

The report from the Centre of Business and Economics Research (CEBR) shows how key the buoyant housing market has been to the health of the UK economy.

Consumer spending will find it difficult to grow much faster than 1% for the next couple of years Centre for Economics and Business Research report

High Street spending has been fuelled by UK consumers borrowing against the growing value of their homes.

However, the CEBR says there are signs the rate of borrowing may fall over the next two years.

As a result, High Street spending and the wider economy could also suffer a downturn.

Consumer spending has been the main force behind the UK economy's relative strength over the past few years, offsetting the troubled manufacturing sector.

High Street spending

Rapid growth in house prices and falling interest rates has tempted many homeowners to borrow against the increased value of their homes.

According to a new report from Datamonitor, lending secured against a property amounted to £14.4bn ($23bn) in 2002 up from £10.5bn the year before.

And the money borrowed has increasingly been spent on the High Street.

The CEBR report says that in 2000, 2.2% of the money spent by consumers was from lending secured against a property.

This figure had increased to 6.5% by 2002.

Had it not been for this extra money, annual consumer spending growth would have slowed from 4.6% to 0.8% last year.

The group are predicting that the importance of borrowing will fall to 5.6% this year and 4% in 2004.

As a result, "consumer spending will find it difficult to grow much faster than 1% for the next couple of years," the CEBR concludes.

And if that happens, even the downgraded Bank of England growth forecasts released last week may prove optimistic.