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Housing ‘bubble alert’ issued for 19 UK towns and cities

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A mortgage broker has issued a “bubble alert” on 19 UK towns and cities, where house prices are rising but mortgage lending is falling.

The research by One 77 Mortgages confirmed the “gap” is a measure of affordability by comparing the percentage difference between annual drop in lending against annual house price changes.

With this metric, Cleveland was most at risk, with property values rising 11% between March 2016 and March 2017, while lending fell 0.9%. Following Cleveland was Blackburn, with a gap of 6.8%, and Blackpool, at 6.2%.

The largest fall in lending was in Darlington and Sunderland, where borrowing fell 1.4%, or by £46m and £27.5m respectively.

Of the 19 towns and cities highlighted in the research, only four were in the South, despite London being “traditionally seen as a bellwether for house price growth nationally” — suggesting that the Northern markets have “already caught a cold.”

“Shrinking mortgage lending sticks out like a sore thumb when you have continued annual house price growth,” said Alastair McKee, managing director of One 77 Mortgages.

Indeed, according to a Royal Institute of Chartered Surveyors (RICS) report out today, the number of new buyers and sellers in the property market continued to fall in September — to the lowest level since the Brexit vote.

The falling lending rates come despite near-record low interest rates, and One 77 Mortgages said that “the shrinking risk appetite in all these areas could be a result of high valuations and stricter lending criteria impacting how much buyers are able to raise to fund their purchases.”

If the Bank of England were to raise interest rates, these property markets would be at particular risk from changing lending conditions.

McKee added: “Buyers have to be careful that, with interest rates still temptingly low, they don’t jump in with both feet by borrowing too much in a local market that is possibly braced for a fall.”

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