Page last updated at 12:59 GMT, Wednesday, 27 May 2009 13:59 UK

Scots mortgage market 'behind UK'

House for sale signs
The Scottish figures suggest first-time buyers usually need a 25% deposit

Scotland's mortgage market appears to be lagging behind the rest of the UK, the latest lending figures have shown.

The Council of Mortgage Lenders said the number of people taking out a home loan in the first three months of 2009 fell 34% from the previous quarter.

Across the UK, 25% fewer mortgages were granted compared to the previous three months. Over the year, Scots lending fell 52%, compared to 44% UK-wide.

But, like the rest of the UK, lending is expected to stabilise in Scotland.

There were 7,600 mortgages issued north of the border in the first three months of 2009, compared to 11,600 in the previous quarter.

The fall in lending was fairly evenly distributed across borrower types.

Loans to Scottish first-time buyers fell by 33% from the previous quarter, and home movers fell by 36%.

Any improvement is likely to be slow and tentative for some while
Kennedy Foster
Council of Mortgage Lenders

Lenders across the UK have tightened criteria in response to the worsening economic outlook and funding constraints, the council said.

Scottish first-time buyers typically needed a deposit of 25% in the first quarter, or about £26,000, compared to a 12% deposit of about £14,000 a year ago.

The council - whose members undertake about 98% of all residential mortgage lending in the UK - said this sum meant that only the most affluent borrowers, or those with help from family, were now able to enter the market.

CML policy consultant, Kennedy Foster, said:"Scotland has lagged behind the UK throughout the decline and as a result may continue to do so when the recovery begins.

"We expect the pace of decline in lending volumes to slow in coming months and flatten out as we have seen elsewhere in the UK.

"In recent weeks there have been encouraging moves by some lenders in developing innovative products to help would-be first-time buyers, but there are still significant funding challenges for lenders and any improvement is likely to be slow and tentative for some while."

'Discredited practices'

Graeme Brown, director of the housing charity Shelter Scotland, said: "The Council of Mortgage Lenders' figures echo our own findings which show that first-time buyers are still being locked out of home ownership despite falls in house prices and low interest rates.

"However, we do not share view of some lenders that a return to high house prices is in the interests of would-be and current Scottish homeowners.

"In particular we do not want to see a return to the discredited lending practices of the past where banks were lending money they didn't actually have or Scottish ministers gambling on the housing market by diverting funds to subsidise home ownership."

He said the shortage of homes, which it said was a key driver in the housing crisis, must be reversed.

"At a time when private building has dropped off, the Scottish Government must make building homes a priority, not just for would-be first-time buyers but also rented homes for people who will never be able to buy," he added.

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