The World Economic Outlook Report says it is more difficult to get on the property ladder in the UK than in other countries and states that while a slowdown in UK means house prices should remain manageable, the IMF could not rule out a collapse.
UK house prices have risen faster since 1997 than in any other industrial country except Ireland so the market is more susceptible to the risk of a sharp fall as interest rates rise.
And the IMF says the impact of rising interest rates would be particularly pronounced in the UK due to the popularity of floating mortgages such as variable, tracker and capped rate deals.
The report also shows that houses are 55% more expensive compared with disposable incomes than they were in 1985 and the gap between earnings and house prices is greater in the UK than in the US, Japan, France or Germany.
But Ernst & Young also published its Retail Financial Services Monitor last week which states that while it is becoming increasingly clear that the boom in the housing market is over, a crash is not likely.
The accountancy and advisory firm says there is more likely to be a steady deceleration in prices and a static period as homeowners choose to sit tight while affordability is restored.
Gross mortgage lending slowed to £25bn in August, reveals the latest monthly survey from the Council of Mortgage Lenders. The figure was 13% lower than in July and just 3% higher than in August 2003. The value of remortgaging also fell back in August but less dramatically, totalling £10.4bn, 6% lower than in July.
CML director-general Michael Coogan says: “This month's figures suggest that the slowdown recorded by estate agents and reflected in recent approvals figures is beginning to work its way through the lending system.”