Savills residential research department is predicting that the slowdown in the mainstream UK housing market will last well into 2008 leading to a period of low turnover and house price growth.

The effects of higher interest rates already vary significantly between the regions, and looking ahead, a strong north-south divide is expected with more robust southern and prime markets being supported by a lack of supply and wealth both generated in and attracted to London. By contrast, affordability is particularly constrained in northern areas which are currently bearing the brunt of the slow down.

However the one clear exception to the north-south divide is Scotland where house prices have continued to grow regardless of interest rates.

Lucian Cook, director of Savills, said: “Current interest levels are impacting on affordability, however as long as there remains a reasonable prospect for rates to drop below their current levels by the end of next year, we do not predict falls in average UK house prices.

“We believe that we are currently witnessing the beginning of a slowdown similar in nature to that of 2004/05, when the number of transactions reduced significantly and house price growth stalled. Unless there is a conspiracy of factors which significantly erode market confidence, we expect the market to respond by slowing for a period, allowing households to rebuild their monthly finances.”