North-South property divide closes

RISING interest rates have failed to damage enthusiasm among homeowners in the North, although there are clear signs of a market slowdown in the South.

Nationally, price rises have cooled, increasing 1.2% in the past month from £193,965 to £196,198 compared with a total 5% increase in the previous two months. The figures suggest four rises in the Bank of England base rate, which has increased 3.5% to 4.5% since November, are beginning to bite.

The increase in rates has particularly affected homeowners in the South, where house prices are highest.

And the figures continue to reflect a closing in the gap between North and South. Average house prices in the Midlands, North and Wales, for example, rose by more than 2.5% compared with 0.25% for the South.

House prices rose even more strongly in Yorkshire and Humberside, going up 3% over the month on average, to £144,075. In the North West prices leapt by 4.2% to £153,849, while homeowners in Blackpool saw house prices rise by a healthy 5.6% this month.

Mike Shipside, commercial director at property website Rightmove, which carried out the research, said: 'It's no coincidence that the rate ries are biting first and most effectively in southern parts of the country, where prices are much higher.

'Buyers, particularly first-time buyers, have always found it a stretch but in may areas are almost priced out of the market.'

Research published earlier this year by National Savings & Investments, revealed it took first-time buyers in the South-East around four years to save for a deposit, on average. This compares to an average of three years for first-time buyers in the South.

Unsurprisingly, demand has also fallen, according to Rightmove, which said the number of available properties in estate agents' windows was up by 4% on the previous month.

The rate at which house prices increase every year is also showing signs of a slowdown. Annual house price inflation fell from 12.2% to 11% in Greater London and from 16.9% to 14.6% in East Anglia.

But the figures could be good news for many potential homeowners, says Shipside. 'What is important is that in a quieter market purchasers now have more choice of good quality properties to buy, while interest rates are still low, with no expectations of a large rise in the cost of borrowing in the future.'