LONDON (Reuters) - Renewed stock market jitters and further evidence of a teetering housing market added to worries over Britain's economy yesterday as a Bank of England policymaker said UK interest rates were too high.

The BoE's David Blanchflower, lamented the decision of his colleagues not to cut interest rates this month and said that at 5.5 percent current rate levels were "restrictive".

Worrying about inflation at the moment, he told the Guardian newspaper, was like "fiddling while Rome burns".

Property prices in England and Wales fell for a fourth consecutive month in January, according to housing market research company Hometrack. This took the annual rate of house price inflation to its lowest in 19 months.

"Weak confidence among would-be purchases continues to put downward pressure on house prices," said Richard Donnell, Hometrack's Director of Research.

The Hometrack figures are the latest in a string of gloomy data recently suggesting Britain's decade-long housing boom is coming to an end.

Roger Bootle, a leading economist and adviser to consultants Deloitte, said he feared Britain was entering its weakest period of growth for 15 years. He expects growth of two percent this year followed by 1.7 percent in 2009, the lowest two-year rate since 1992.

Moreover, there was a risk that the credit crunch could exacerbate the slowdown, tipping the country into full-blown recession.

"The 'big one' might now finally be upon us," he said.

Falling stock and house prices could prove to be a potent combination at a time when Britons are already tightening the purse strings.

Britain's blue-chip stock index has shed 11 percent so far this month and is on track for its biggest monthly drop in percentage terms since September 2002.

Front-page newspaper headlines calculating the hit to investors and pension funds are likely to make consumers even less inclined to splash out. With credit companies clamping down on risky lending practices, even those that want to spend may find they can't.

"I didn't have a single phone call about a car all week," Andy Ilarianos, owner of independent car dealer Veedub Services, based in the English midlands city of Leicester, told Reuters at the weekend.

The knock is not just to confidence. A survey by forecasting group Experian on Sunday predicted as many as 20,000 jobs in London's financial district were likely to be wiped out due to the financial crisis. Consumer confidence, which hit a 12-year low in December according to pollster GfK/NOP, is expected to showed a further deterioration this month. And there appears little end in sight to the housing market gloom.