LONDON, Sept 18 (Reuters) - There is a "one-in-10 chance" of a 1990s-style UK housing market crash, the Royal Institution of Chartered Surveyors (RICS) said on Tuesday, after scaling back its expectations for British house price inflation.

Simon Rubinsohn, chief economist of the RICS, which closely monitors national and regional property prices, said his base case was for flat house prices across Britain in the next 12 to 15 months, down from an earlier forecast of 3 percent growth.

He also said there was a 20 percent chance of a 10 percent fall in London house prices over the next 12 months and said talk of a looming "crash" was legitimate and not irresponsible.

But like other housing market experts he said homeowners were unlikely to see a repeat of Britain's previous housing slump, when average prices fell by an inflation-adjusted 35 percent from their peak in 1989, according to data from property services firm CB Richard Ellis.

Peter Damesick, head of UK property research at CB Richard Ellis, said the chances of a housing market crash were still "pretty small" because there was no obvious trigger in the offing such as the economic downturn or sharp interest rate hikes seen in the early 1990s.

Rubinsohn said the RICS was not reacting simply to mortgage lender Northern Rock's cashflow woes, which have been pushing up mortgage rates and could reduce the availability of credit, but had already been scaling back its expectations in the wake of previous UK interest rate rises.

Those interest rate rises now appeared to have run their course, economists said, leaving the Bank of England with enough room to cut them if housing market conditions worsened significantly next year.

"The risks in the near term are to the downside but further out, where there is scope for offsetting policy actions to take effect, we are more confident," said Michael Taylor, senior economist at Lombard Street Research, which was sticking to its view of negligible average house price growth in 2008.

UK base rates rose to as high as almost 15 percent in October 1989, leading to economic recession and high unemployment, and remained above 10 percent by the end of 1991 as the country battled with inflation, according to the Bank of England's Web site.

They are at 5.75 percent currently, having risen from a low of 3.5 percent in mid-2003.

ECONOMIC OUTLOOK

The UK economic outlook was also relatively healthy, keeping people in jobs and supporting demand for housing -- in sharp contrast with the early 1990s -- with economists on average expecting UK economic growth to slow from an above-trend 2.9 percent to around 2.3 percent in 2008, property experts said.

However, the longer the uncertainty surrounding Northern Rock and other lenders lasted and the longer the financial system remained clogged up because banks were reluctant to lend to each other, the greater the risks to that rosy outlook and to UK housing.

"It's important to remember that sentiment can change quite quickly," Rubensohn said.

As in the early 1990s, homeowners in London have particular reason to fret because of the extent to which house price rises in the capital have outperformed other regions and gained impetus as a result of its booming financial services industry.

"There will be some knock-on effects on consumer confidence but those sorts of things only have serious consequences if they last a long time," Taylor said. "Banks need to work out their losses and disclose them so that we can move on again."

Taylor said he was optimistic the banking system could sort itself out and that the fallout for financial industry employment could be contained because there were clear incentives for banks to declare losses and re-establish counterparty confidence.

But he was also clear about the risks for housing and the wider British economy if the financial system's crisis of confidence did not ease.

"You would have to get significantly more worried if the situtation lasted until the end of the year," he said.

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