HOUSE prices in the North are increasing at about three times the rate of those in the South, figures showed yesterday.

Britain's biggest mortgage lender, the Halifax, said annual house price inflation was running at 38 per cent in the North during the third quarter of the year, while in Yorkshire and the Humber the cost of property was 32 per cent higher than a year ago.

In Greater London, prices have increased by only nine per cent during the past year, while the cost of homes in the South-East and South-West are just 12 per cent higher.

The bank said that all of the UK's top ten property hotspots for the past year were outside the South.

Paul Reynolds, chairman of the North-East branch of the National Association of Estate Agents, said that while some prices had risen, there was evidence of the market flattening out.

He said: "We have seen house prices rising at that level, but now we are starting to see evidence that the rise at the top end of the market, houses in the £200,000 to £300,000 bracket, are starting to taper and even out.

"The main reason is affordability, because in general, people need to take mortgages to afford that type of property, and there is only so much you can borrow.

"In the North we do see evidence of over-pricing to get houses onto the market.

"People are still buying houses, but we are seeing that people are not rushing to buy because they are worried that prices are going to go up the next week, instead they are taking their time and looking around to make sure they are spending their money wisely."

Halifax said the gap between prices in the South and the rest of the country had narrowed slightly during the past six months, although it still remained substantial. The average property price in London was now £223,460 compared with a national average of £134,100.

Martin Ellis, Halifax chief economist, said: "The recent rapid rises in house prices in the North have led to a modest reduction in the north/south property divide over the past six months.

"'More favourable housing affordability and encouraging labour market trends in the North should cause the gap to narrow further during the coming few quarters."