MEMORIES of Black Wednesday can still leave homeowners in a cold sweat.

When John Major's Government hiked up interest rates to 15 per cent in a failed battle to keep Sterling in the exchange rate mechanism, it prompted a horrible economic hangover.

Many householders were trapped with negative equity. Worse still, thousands lost their homes altogether.

Could history be back to haunt us? Everyone buying their own home is asking that question today, after the Council of Mortgage Lenders (CML) said interest rates would need to hit double figures again to halt rocketing house prices.

No one doubts that the relentless rise in property prices has to end somewhere. But if a ten per cent interest rate is really needed, many will ask whether the cure is worse than the disease.

York estate agents were quick to talk down the possibility of a doubling in the mortgage rate. One detected a slowing of the market, in contrast to the CML which doubled its forecast for house price growth in 2004 to 14 per cent.

The committee of the Bank of England has a delicate balancing act to perform. Its job is to keep down the headline inflation figure, but its members are naturally concerned about property prices.

But in the battle against rampant consumerism, a massive hike in the interest rate is a sledgehammer that can cause more harm than good. For the sake of industry and homeowners alike, we hope the Bank of England continues to act with prudence.

Updated: 11:17 Monday, May 24, 2004