The 19 UK towns most at risk of a house price bubble: Cleveland, Blackburn and Blackpool come top

Emma Haslett
Follow Emma
Blackpool Prepares For The Summer Season
Blackpool was names one of the towns at highest risk of a house price bubble (Source: Getty)

UK house prices may still be rising, but with the Bank of England on the brink of hiking interest rates, the market may be about to change trajectory.

Now, by comparing lending levels with house price rises, new research has listed the UK towns and cities most at risk if lending conditions change.

Mortgage broker One 77 Mortgages has put a "bubble alert" on 19 areas in the UK where a steep fall in lending has coincided with a jump in house prices. The result is that buyers in the likes of Cleveland, Hereford and Liverpool could be at risk.

Read more: Why London's property market is still firmly at risk of a bubble

Warning on the North

The ranking put Cleveland at the biggest risk of a bubble, after house prices rose 11 per cent in the year between March 2016 and March 2017, but lending fell 0.9 per cent, clearing a so-called affordability gap of 11.9 per cent.

That was followed by Blackburn, where the affordability gap is 6.8 per cent, and Blackpool, where it is 6.2 per cent.

In fact, only four of the areas in the ranking were in the South, which researchers said suggested the North has "already caught a cold".

"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," they said.

Read more: UK house prices just hit their highest on record

Bubble warning: The UK's bubbliest towns

Area Annual Change in Lending Annual Drop in Lending Annual House Price Change Affordability Gap
Cleveland -0.9% £53,589,511 11.0% 11.9%
Blackburn -0.6% £27,761,009 6.2% 6.8%
Blackpool -1.2% £36,189,774 5.0% 6.2%
Torquay -0.6% £24,541,823 5.0% 5.6%
Bolton -0.1% £4,709,553 5.2% 5.3%
Plymouth -0.3% £21,373,711 4.5% 4.8%
Bradford -1.0% £57,588,683 3.7% 4.7%
Liverpool -0.2% £19,030,886 4.5% 4.7%
Dorchester -0.7% £19,963,937 3.5% 4.2%
Harrogate -0.3% £7,001,238 3.7% 4.0%
Darlington -1.4% £45,969,751 2.6% 4.0%
Carlisle -0.5% £10,849,257 3.4% 3.9%
Doncaster -0.7% £49,802,527 2.8% 3.5%
Sheffield -0.1% £16,076,849 2.7% 2.8%
Huddersfield -1.1% £31,045,436 1.6% 2.7%
Sunderland -1.4% £27,565,238 1.0% 2.4%
Hereford -0.6% £12,379,549 1.6% 2.2%
Newcastle upon Tyne -0.7% £76,875,551 1.0% 1.7%
Truro -0.2% £7,329,788 1.2% 1.4%

“Demand is what drives sentiment and sentiment is what drives prices. But somewhere in the middle people still need to borrow, said Alastair McKee, managing director of One 77 Mortgages.

“Shrinking mortgage lending sticks out like a sore thumb when you have continued annual house price growth.

“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.

“If opinions about these stretched valuations are starting to feed through into these borrowing numbers then it’s vital purchasers are even more careful not to end up sitting on unnecessary losses."

“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 per cent 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.”

Read more: Research shows the 1m new homes target won't make them more affordable

Fall in demand

This morning figures by the Royal Institution of Chartered Surveyors (Rics) showed demand in the housing market fell in September, with 20 per cent of estate agents saying they had noticed a drop in potential buyers during the month.

Rics said part of the problem was anticipation of an interest rate rise in November, although in pricier regions such as London, affordability was one of the main concerns.

Read more: Rural properties prove pricier: Here's why... and where not to buy

Related articles