Revealed: Middle Britain will be hardest hit by falling house prices

Middle Britain will be hit harder by falling house prices than the rest of the country, research shows.

It warns that on average almost £40,000, or more than £100 a day, will be wiped off the value of these homes this year. 

A typical Middle Britain property will fall 18 per cent between January and December, according to the insurance firm AXA and the Centre for Economics and Business Research (CEBR).

This would mean homes worth an average of £216,000 at the start of the year would drop to £176,500 by the end of the year. 

But the value of the 'average' home, worth £187,500, will drop by only 12.8 per cent.

The scale of the fall in property values was revealed as new figures show mortgage lending has now fallen to its lowest level for more than two years.

Lending levels are now down a massive 32 per cent on the same period last year, according to the Council of Mortgage Lenders.

The 'Middle Britain' label in the new research from AXA and the CEBR includes those households with an income between £40,000 and £100,000, typically in the South-East, South-West and the East.

It usually encompasses graduates with families, who have a mortgage and work in managerial or professional jobs.

The research says many Middle Britons risk going into negative equity  -  having a loan greater than the value of their home  -  especially those who bought houses recently.

It comes as Michael Saunders, economist at the investment bank Citigroup, warned that the fall in prices could be worse than the Great Depression. 

'The way things are going, this year's drop in house prices may even exceed the 1932 record.' That year, prices dropped 10 per cent to an average of £540.

Meanwhile, the consultancy Capital Economics believes that by the end of 2010, prices could be 35 per cent down from their peak last year.

Areas with the highest concentration of Middle Britons are Richmond upon Thames in London, Windsor and Maidenhead and Wokingham, Berkshire. 

So far, the value of Middle Britain's homes has been relatively 'immune' to the credit crunch, researchers say.

But John Ward, managing economist at the CEBR, said: 'Middle Britain will experience a sharper fall in house prices compared to the rest of the country because its resilience to the credit crunch is finally buckling. 

'Whereas the country as a whole has been experiencing a slowdown for some time now, Middle Britain's house prices have remained steady until recently. 

'This means the effects will be felt more starkly as prices decrease more rapidly.'

But they will recover more quickly when house prices pick up, largely because Middle Britons live mainly in the South which has 'greater economic robustness', he said. 

Soaring food and fuel bills and higher mortgage repayments are also starting to hurt Middle Britain, the research says. 

Debt advice centres in its 'heartlands' have seen the number of inquiries rise by up to 500 per cent. Those on salaries as high as £70,000, nearly three times the national average, are seeking help.

Steve Folkard, head of pensions and savings policy at AXA, said: 'We expect a very tough 18 months for Middle Britain's housing market.

'Middle Britain may have managed to weather the storm before now, but that resilience is being seriously tested by the ongoing effects of the credit crunch.' 

Falling house prices have caused property website Rightmove to coin a new phrase. 'Brickor mortis' is the paralysing condition caused by sellers refusing to lower prices as they don't accept their home's value has dropped. Buyers won't buy as they think homes will be cheaper in the future  -  or because they can't get a loan.