Gulf to grow wider still

House prices in the north of England are expected to rise far less than those in London and the south-east in the next few years.

The outlook for regional property values will be greatly impeded by cuts in the public sector and the ability of borrowers to secure mortgages.

While Savills has forecast a 12 per cent rise across the UK by 2015, the widening gulf between the performance of different regions is stark.

The estate agency has forecast only a 0.7 per cent rise by 2015 in the north-east of England; 1.7 per cent in Yorkshire and Humber; and 3.3 per cent in the north-west.

In contrast, the south of England will see double-digit growth. Areas such as London will rise 29.1 per cent; 25.5 per cent in the south-east; and 21.4 per cent in the east.

“Outside of the south-east and London, it’s going to take considerably longer to correct,” said James Hyman of Cluttons.

“These areas are much more linked to the economy as a whole in relation to what’s happening in unemployment and the mortgage market. Homeowners aren’t carrying the same amount of equity as those in London, so remortgaging is becoming much more difficult and the rise in interest rates is going to make it much harder.”

Stuart Flavell of Connells warned it would be difficult to predict how long the squeeze on lending would remain.

New research this week, funded by the Council of Mortgage Lenders showed that 2.2m current borrowers would have been unable to get mortgages if new affordability rules by the Financial Services Authority were in place.

The regulator has proposed new rules requiring proof of income and maximum repayment-to-income ratios that take account of future rises in interest rates.

“A ‘one size fits all’ policy will make it very difficult for many people to get funding or to remortgage,” said Melanie Bien of Private Finance.