Growth in home values has already beat analyst forecasts for this year but could climb much higher if interest rates don't rise, said top estate agent Savills.

The firm has predicted house prices are to rise by an average 17 per cent over the next five years.

But in the South East and East of England property values are set to increase by a whopping 21 per cent.

After already experiencing record growth, London prices are to grow by around 15 per cent between now and 2010.

The slowest growth is expected in the North East and North West, where values have been to forecast to lift by 12 per cent and 13 per cent respectively.

The forecasts are based on interest rates staying below 4.5 per cent, but it's now expected that the base rate may only rise to 0.75 per cent in around 2017.

Thereafter, rates are expected to rise gradually and slowly to avoid economy shocks.

It means that mortgage rates are also likely to remain low, making borrowing cheaper for prospective homebuyers, as well as increasing levels of buy to let investors.

Rents will rise by 16 per cent across Britain, but by almost 23 per cent in London, estimates Savills.

However, the supply of housing has now fallen to record lows and expected to continue to falling far short of demand to push prices up.

Lucian Cook, head of Savills residential research, said: "Much depends on the speed at which interest rates rise, if rates rise too quickly mainstream house price growth will be quickly curtailed.

"On the flipside, if rates remain low for too long, there is a risk that prices will rise too far, creating affordability issues further down the line when they do eventually rise.

"That risk has been mitigated by recent mortgage regulation which, by stress testing affordability, caps the amount people can borrow relative to incomes.

"That is likely to cap price rises, particularly in London, where house price to household income ratios are highest, thanks to growth seen over the past 10 years.”

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