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Buyers in southern England are being hit harder than their northern counterparts by higher mortgage rates, Zoopla analysis shows.
In the south buyers typically have to take out bigger loans to fund their purchases due to the higher house prices around London and the south east in particular.
Due to the trend of rising mortgage rates prices are down by 2.2% in a year across the south, compared to gains between 4.3% in northern areas like Halifax, 3.7% in Wolverhampton and 3% in Falkirk.
Hikes in mortgage rates have depressed demand by almost a fifth (18%) in just two months.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “The north/south divide is alive and well. In the south of England, where prices are higher and so mortgages are bigger, hikes in rates have a disproportionately large impact. It’s making it far harder for people to stretch to get onto the property ladder or into a bigger property, so demand is dropping, and sellers are being forced to cut asking prices further.
“Meanwhile in the north, areas like Halifax, Wolverhampton and Falkirk are enjoying far more robust growth. In some areas we may well see prices continue to rise throughout 2023, so the north/south divide may well widen through the rest of the year.
“There are exceptions to the rule. There are pockets of the north where prices are dropping, as the cost-of-living takes a toll. Sunderland, for example, has seen falls of 1.7%, Aberdeen 0.9% and Northern Ireland 0.8%. Likewise, in London, although prices are the highest in the country and are falling, they’re not dropping as fast as you might expect, partly because they haven’t seen such stellar price increases over the past year as elsewhere.”
Average house prices are up just 0.6% in a year and are still expected to fall 5% during 2023.
Some 6.5% of homes for sale have had asking price cuts of over 5% – which is 60% above the five-year average.
Hargreaves Lansdown’s Coles said there are some positive movements seen in the mortgage market.
She added: “Ever since inflation figures came in lower than expected last week, we’ve seen a shift. The market is pricing in fewer rate rises, so fixed rate mortgages have been getting cheaper.
“On Wednesday, the average 2-year fix was priced at 6.86%. It will take a while for lenders to reprice, but we’ve already seen HSBC and TSB cut mortgage rates, and other big lenders are likely to follow suit.
“We’re not going to see any really big movements while there are concerns that higher rates will stick around for a while, but we may well see rates get back closer to 6%, making life slightly easier for buyers.”