There is little chance of the credit crunch having an adverse effect on the UK economy, it has been claimed.

The Ernst & Young Item Club forecasts a modest slowdown in national economic growth, but rejects the suggestion that house prices could be set to crash.

As such, homeowner loans could remain an effective way of obtaining extra funds previously locked up in property.

Professor Peter Spencer, chief economic adviser to the thinktank, comments: "The threat of a major credit crunch seems to be receding."

Britons may also welcome the news that house prices are likely to climb in the future, increasing the amount which may be obtained via homeowner loans.

"As interest rates come down and new supply remains restricted, the foundations will be laid for renewed real price growth," Professor Spencer explains.

The comments revise the previous assertion by Ernst & Young that the credit crunch could "knock the stuffing" out of the housing market in the run-up to Christmas.ADNFCR-1287-ID-18325788-ADNFCR

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