LONDON (AP) — Dave and Nicole Anderson had planned to usher in the New Year in a new, larger home — an upgrade made possible by the recent sale of their two-bedroom apartment in the British capital.

Instead, the couple is spending the holiday season in a rental flat, where they plan to stay for a while as they watch the country's housing market begin to slide, weighed down by the US subprime mortgage crisis.

After a price boom lasting more than a decade, the downturn has implications for the economy as a whole, putting the lid on an era that had allowed many consumers to borrow money cheaply, remortgage quickly and run up large debts.

The only question is how severe the slowdown will be.

The Andersons, thanking luck for allowing the sale of their apartment in Earls Court, west London, to go through before the collapse of global credit markets in August, are hoping for substantial declines as they wait for the right moment to pounce on a lower price tag.

"At the moment, it would seem silly to make a commitment," said Dave Anderson, 42, an IT consultant. "Ideally, for us, prices would come down a lot and we'd buy our dream house next year."

Economists warn that an increasing number of people adopting the Andersons' stance could make for a self-fulfilling prophecy — Morgan Stanley economists are predicting house price declines of up to 10 percent as banks tighten lending standards and economic growth slows.

"There is undeniably a very real — and growing — danger that the housing market could see a sharp correction next year," said Howard Archer, chief UK economist of consulting firm Global Insight in London.

Concerns about widespread falls were bolstered by a November report from mortgage lender Halifax showing that British house prices dropped for the past three consecutive months, taking annual house price growth for the year down to 6.3 percent from 8.9 percent the previous month.

Much of the negative sentiment in the market has been blamed on the very public downfall of mortgage lender Northern Rock, Britain's biggest victim of the global credit squeeze.

The news that Northern Rock had turned to the Bank of England for emergency funding in September caused Britain's first bank run in more than a century and the future of the lender remains uncertain. The government, already $51.2 billion out of pocket, is currently considering prospective buyers.

The fallout from the subprime crisis has also spurred the Bank of England into a rare December interest rate cut, taking the base rate down to 5.5 percent.

That marked a turnaround from a few months ago, when the bank's next move had been expected to be another hike to close off a rising cycle. The bank lifted rates five times between July 2006 and July 2007 to a six-year high of 5.75 percent in a bid to counter soaring inflation along with the booming housing market.

There have long been complaints about high prices restricting access to the housing market, particularly in London, where a single person earning an above average income still struggles to get on the property ladder.

Analysts warn that those issues of affordability will be exacerbated by the fact that persistent concerns about subprime mortgages mean that lenders are becoming much more careful about whom they lend to, and on what terms.

Significantly, the credit squeeze is making it increasingly difficult for mortgage lenders to access adequate funds to finance new mortgage business.

Mortgage approvals recorded by the Bank of England, a good indicator of the future health of the housing market, fell in November to their lowest level in nearly three years, while mortgage lending slowed sharply, reflecting the tighter credit conditions.

But many economists are also hopeful that Britain's high employment and sound economic fundamentals will prevent a full-blown price crash.

"It is clear that there are uncertainties in the market, not least from the continuing turmoil in the UK's financial markets and the overall impact this may have on the future performance of the UK economy," said Fionnuala Earley, Nationwide's group economist. "We already expect economic conditions to be more difficult for the housing market next year, but we do not expect a recession."

The British subprime sector has expanded in recent years, but the number of loans granted to people with poor credit ratings here is nowhere near those issued in the United States, where the crisis originated.

While one in five US mortgages are in subprime, that sector accounts for just six percent of the entire home loans market in Britain. Peter Williams, the executive director of the Intermediary Mortgage Lenders Association, also noted that British market is more tightly regulated and has higher credit quality standards.

The Council of Mortgage Lenders expects about 30,000 homes to be repossessed this year — higher than the 22,700 last year but still significantly less than the 75,500 homes that were taken back by lenders during a recession in 1991.

Nationwide expects the number of property transactions, rather than prices, to bear the brunt of the fall. The lender expects transactions to fall by 15 percent in 2008.

Archer, who is forecasting flat price growth in the coming year, said that the downside for house prices is likely to be limited by a lack of supply, the increasing number of households, high employment and the fact that many sellers can afford to wait to get a better price.

Many economists also expect at least two more rate cuts next year, taking the benchmark rate from the current 5.5 percent to 5 percent.

That would further ease pressure on the market, but Halifax said its forecast of zero percent house price inflation next year factors in those two cuts.

Meanwhile, the Andersons are settling in to a two-bedroom rental apartment the same size as the one they sold. But they aren't bemoaning the lack of extra space they were planning to have already.

"It doesn't feel like putting our life on hold," said Dave Anderson. "There's the opportunity to potentially pick up a really nice house for 20 percent or 30 percent less — that's much better for us in the long term."