A growing affordability gap is fuelling an increasingly pronounced north-south divide in the housing market with buyer activity proving far more resilient in lower-priced northern regions despite higher mortgage rates and economic uncertainty.
Latest data from Rightmove shows the average asking price of a property coming to market rose by 1.2% in May to £378,304, exceeding the typical seasonal increase for this time of year.
However, the headline figures mask widening regional divergence, with northern England continuing to outperform southern markets where affordability pressures remain far more acute.
The North East recorded annual asking price growth of 2.7%, followed by the North West at 2.6%, while London prices fell by 2.4% and the South East declined by 1.6%.
FIRST-TIME BUYERS
The figures suggest affordability is increasingly becoming the defining factor shaping market activity, particularly for first-time buyers and highly leveraged borrowers.
Rightmove said agreed sales are currently running just 4% below the same period last year despite mortgage rates remaining significantly higher, while activity remains 2% ahead of 2024 levels.
The first-time buyer market has also held up better than many expected, with agreed sales down by just 4% year-on-year and prices for typical first-time buyer homes falling by 0.7%.
At the same time, buyer choice has risen sharply, with available stock reaching its highest level for this time of year since 2015.
Rightmove found that 32% of homes currently listed for sale have already undergone a price reduction, underlining growing price sensitivity among buyers.
The portal said homes needing a reduction spend an average of 127 days on the market compared to just 36 days for properties priced correctly at launch.
STEADY ACTIVITY
Colleen Babcock, Property Expert at Rightmove, said: “It’s normal to see asking prices pick up as we move through the spring selling season.
“What’s notable this month is that activity in the market is staying fairly steady, even with ongoing cost-of-living pressures and wider global uncertainty.
“However, this overall positive national monthly snapshot masks a north-south divide in year-on-year seller pricing-power. Prices are rising in the north, but all sellers should note that buyer choice is now at its highest level for this time of year since 2015.”
GREATER FLEXIBILITY
Matt Smith (main picture, inset), mortgage expert at Rightmove, added: “Small rate falls can make a meaningful difference to monthly budgets, and when combined with greater flexibility in lending following last year’s review of affordability rules, many buyers are still able to make the numbers work.
“This helps to explain why activity has continued to hold up, particularly among first-time buyers.”
AFFORDABILITY FACTOR
Tom Bill, Head of UK Residential Research at Knight Frank, warned that recent increases in borrowing costs linked to global instability could continue to weigh on demand over the coming months.
Meanwhile, Tomer Aboody, Director of specialist lender MT Finance, said affordability remained “the main driving force in the housing market”, particularly for buyers outside southern England where lower house prices are helping offset higher mortgage costs.
