The latest ‘bubble alert’ from One 77 Mortgages found lending in March 2017 was in decline compared to March last year as house prices continued to rise in 19 towns and cities across England.
The results stemmed from the UK Finance Q1 2017 postcode area statistics compared with the local authority House Price Index March 2017 verses 2016.
The mortgage broker told buyers to “mind the gap” between the drop in borrowing and rise in house prices, with Cleveland in the north-east at the top of the list with an 11.9% annual house price change.
Blackburn, Lancashire, was not too far behind with a 6.8% gap, while the summer retreat hotspot Blackpool coming third with a 6.2%.
Traditionally, London is seen as the leader of the trend for national house price growth, however it did not make the list.
Commenting on the findings, Alastair McKee, managing director of One 77 Mortgages, said: “Demand is what drives sentiment and sentiment is what drives prices, but somewhere in the middle people still need to borrow.”
“It’s a case of mind the gap for buyers in these areas as lending takes a different trajectory to prices.”
In the Southern areas, Truro, Torquay, Plymouth and Dorchester had an average drop in lending of 0.5% and price increase of 4%.
Shrinking in these areas could be a result of stricter lending and high valuations, which heavily impacts how much buyers are able to raise in order to fund their purchases.
“Shrinking mortgage lending sticks out like a sore thumb when you have continued annual house price growth,” warned McKee.
“In those areas where the two are headed in different directions, this is likely to be the result of first-time buyers beginning to vote with their feet in the face of steep valuations coupled with smaller budgets thanks to stricter lending criteria.”
Overall, the largest fall in lending occurred in Sunderland and Darlington, where borrowing plummeted 1.4% from March 2016 last year.
McKee warned that purchasers should avoid sitting on unnecessary losses. He said: “This is especially important if you are still looking to buy using the Help to Buy scheme which could mean you own as little as 5% of your property to begin with.”
“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,” he cautioned.