U.S. mortgage finance company Freddie Mac said on Tuesday that rising interest rates would lead to a slowdown in the U.S housing market but added it did not expect the market to crash.

"Rising interest rates will lead to a slowdown in the U.S. housing market," said Chief Executive Richard Syron, speaking to Reuters in Paris where he was on a business engagement.

"What we're ultimately driven by is mortgage debt outstanding. That's the total amount of mortgages which are generated in any year in dollars in the United States. That grew a little close to 13 percent last year. We think ... the rate of growth this year will be substantially less, it will be in the 8-10 percent range, my own view is that it will be toward the low end of that," said Syron.

Stock markets around the world have tumbled in recent weeks on fears that interest rates may rise amid inflationary pressures.

Syron said, however, that the U.S. housing market was unlikely to crash, despite fears of the effect of higher rates.

"We do not think that there will be a crash. We think that by and large, overall, nationally, there will be a material slowing of the rate of appreciation of housing prices, but not an absolute decline," he said.

Syron added that higher rates would not necessarily have much of an impact on Freddie Mac, which is recovering from a multibillion-dollar accounting scandal.

"In terms of our current book, we don't think it will have much of an effect. We've been very cautious in how we've guaranteed obligations over time. Our loan-to-value ratio on a typical mortgage that we've guaranteed is around 55 percent, not much over 50 percent," he said.

"There's a lot of equity in these properties. We don't think we're very vulnerable from a credit position," said Syron, although he added that 2006 was likely to be a "slower growing year" than 2005 in terms of Freddie Mac's retained portfolio.

KEEN ON OVERSEAS PRESENCE

Freddie Mac is a federally-chartered, shareholder-owned financial institution. Freddie Mac and larger sibling enterprise Fannie Mae are tasked by the U.S. Congress to support housing by keeping money flowing in the mortgage market.

To do this, they sell debt and use the proceeds to buy mortgages from lenders, giving lenders money to make more loans. They then securitize or repackage those loans into securities for sale to investors.

They also hold some loans and securities in their portfolios.

Syron said Freddie Mac aimed to maintain a solid presence in European financial markets and that the company could do more transactions in Europe in the longer term.

He added he would travel to Moscow later this week.

"What we want is to be sure we have a well diversified source of finance outside of the United States as well as inside the U.S.," he said.

Freddie Mac's earnings have not been current since accounting problems in 2003 led to a $5 billion profit restatement and management overhaul.

Syron reaffirmed that Freddie Mac hoped to report 2006 numbers in the first quarter of 2007.

"We are hopefully approaching the end of our accounting saga.... (But) we still think we have significant progress to make in the control area."

Syron added that Freddie Mac's capital position was strong and was expected to remain so for the near future.

"We have an extremely strong capital position. We have 45 percent excess capital over what's required by law."

"Our dividend has increased 81 percent in the last two years. We would hope that, consistent with getting our financial house in order, and generating strong earnings, that we would continue to increase the dividend over time."

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