The UK economy could suffer from a much worse house price crash than has recently been seen in the US, an economic consultancy has warned.

Capital Economics called the similarities between UK and US consumers "disturbing", adding that a key factor of the slump in the US has been falling house prices, which are now being seen in the UK too.

It found people in the UK are more indebted than those in the US, with total household debt now standing at the equivalent of 175% of household disposable income, compared with only 128% for Americans.

The group also said household assets have risen more sharply in the UK, blaming the sharp rise in house prices a key factor.

But the group warned that the UK housing market looks even more vulnerable to a sharp correction than in the US.

The UK has not seen the surge in sub-prime borrowing - where lenders advance money to people who would be turned down by mainstream banks - and a lack of housing supply in the UK could also support house prices.

But the group added that with UK mortgage lenders tightening their lending criteria, UK house prices are likely to follow the trajectory of the US market.

UK economist at Capital Economics Vicky Redwood said the relationship between house prices and consumer spending in the UK has recently been stronger than in the States, suggesting UK consumer spending is at a greater risk from falling property prices.

UK consumers are also unlikely to enjoy the same fiscal and monetary boosts as in the US, where consumers are benefiting from tax cuts and interest rates have recently dropped to 2.25%.

Ms Redwood said: "We expect UK consumer spending to rise by just 1.5% or so in real terms this year, a slightly bigger rise than is likely in the US.

"But whereas US spending growth could start to recover next year, UK spending growth looks likely to slow further. With both countries the main risks lie to the downside."

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