House prices across the UK are unlikely to experience a "significant drop" in 2008 but the market still faces challenges, it has been predicted.

Ross Bowen, managing director of Connells Survey & Valuation, said that this year has seen the housing market has "hardened" this year, saying that five interest rate rises prior to the Bank of England''s (BoE) decision to cut the base rate this month "have stretched the budgets of some".

"There is anxiety over the impact of this for homeowners rolling off their discounted mortgage schemes next year.

"While we expect house prices to come under continued pressure next year, the wider economy remains strong enough to resist any significant drop on a national level," he explained.

Mr Bowen added that the steadying of world financial markets and the possibility of further interest rate cuts next year and would "have an increased impact on the housing market next year".

Today it was revealed that the BoE''s decision to cut the base rate this month was unanimous, with members of the Monetary Policy Committee considering the possibility of reducing it by more than the 0.25 per cent they ultimately settled on.