A US-style housing market crash has been tipped to be repeated in Britain, but with a longer period of pain for borrowers on this side of the Atlantic.

Softening inflation in the US compares to price rises remaining sticky in the UK where the Bank of England could raise its base interest rate even further, piling more misery on borrowers.

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The average, long-term US mortgage rate climbed to just under seven per cent this week, marking its highest level since November in the latest setback for homebuyers grappling with a tough stateside housing market.

Mortgage buyer Freddie Mac said on Thursday the average rate on the benchmark 30-year home loan rose to 6.96 per cent from 6.81 per cent last week. The rate averaged 5.51 per cent a year ago.

Meanwhile, in Britain the average five-year fixed mortgage rate is 5.79 per cent, based on 75 per cent loan to value, according to Uswitch.

According to figures released by Moneyfactscompare.co.uk on Thursday, the average two-year, fixed-rate mortgage for homeowners across all deposit sizes is 6.75 per cent, while the average five-year fix on offer has a rate of 6.27 per cent.

Mortgage rates have jumped in recent months amid expectations interest rates will stay higher for longer to combat Britain’s stubbornly high inflation.

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While mortgage markets in Britain and the US are facing challenges in the current environment, the countries’ systems differ markedly with American mortgage holders more insulated from interest rate shocks because they can fix a rate for 30 years rather than two or five years.

US mortgage holders can therefore pay the same amount per month for the whole term of their mortgage whereas British mortgage borrowers payments can fluctuate wildly over a relatively short period.

There is also a government-backed secondary mortgage market in the US which helps keep money flowing through the system.

First-time buyers across the pond can also get on the housing ladder with a deposit as small as three percent, compared to 10 per cent to 15 per cent in Britain.

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Asked if Britain will see a US-style house price disaster, independent financial adviser Samuel Mather-Holgate of Mather and Murray Financial, told Express.co.uk: “The UK housing market is on the precipice, clinging on by its fingertips and recent rate rises will mean it can no longer take the pressure.

“The Bank of England has gone too far, piling more misery on homeowners. With two million households coming off fixed rate over the next couple of years, they will be paying an eye watering £6,000 extra per year on their mortgages.

“Any sane person realises this will trigger a colosal crash in the housing market that will make the global financial crash seem like the good old days. A depression of 25 per cent isn’t out of the question if the central bank doesn’t reverse its position on rates quickly.”

Riz Malik, Founder and Director at R3 Mortgages, told Express.co.uk the halt on repossessions outlined in the Mortgage Charter will stop a freefall in UK property prices for the coming year.

He added: “However, the UK’s delay in dealing with inflation has not only left us lagging behind the US, but also in an increasingly perilous situation, particularly as we opt for shorter-term fixes. Apart from during lockdown, I haven’t seen it this bad for a very long time.”

Mortgage expert Lewis Shaw, Founder of Shaw Financial Services said the UK property market is “a total omnishambles”.

He told Express.co.uk: “Prices are completely out of touch with reality and for hard-working Brits earning an average wage job in a role that many people wouldn’t want to do, homeownership is nothing but a tortuous dream, with many knowing they’ll never achieve that goal.”

Joe Garner, Managing Director of Joe Garner Consulting, said the US has potentially saved itself from a deep recession and major house price crash by acting quickly and decisively.

He added: “We have been slow, indecisive and caught on the back foot in the UK with the Government asleep at the wheel and are likely to pay the price for this.

“House prices are likely to drop, people will likely lose their homes and businesses and it appears that we are just going to sit and watch it happen.”

Bob Singh, foudner of Chess Mortgages, said: “Rishi Sunak needs to deliver on his pledge to halve inflation by year end or face political oblivion.”

Stephen Perkins, Managing Director of Yellow Brick Mortgages, said a price correction is long overdue in the UK housing market.

He added: “The lack of supply from not building enough houses over a sustained period and reasonable demand despite increased mortgage and living costs should mean a less dramatic decrease in house prices on this side of the pond.”

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