Mortgage lending picks up for Scotland

| August 26, 2009 | 0 Comments

Mortgage lending activity in Scotland has begun to stabilise, the Council of Mortgage Lenders (CML) reports.

In the second quarter of 2009 there were 11,400 house purchase loans taken out across the region, a 50% rise from 7,600 during the previous three months, but nevertheless 39% below the figure for a year earlier.

The increase was spread evenly across first-time buyers and home movers, with 4,300 loans to first-time buyers (up 54% from the previous quarter) and 7,200 loans to home movers, representing a quarterly increase of 53%.

Remortgaging activity remained subdued with 9,000 Scottish loans approved in the three months to the end of June, worth £900 million, compared with 11,000 loans worth £1.6 billion in the first three months of the year.

The CML suggests there is some evidence that the tightening in lending criteria is slowing.

First-time buyers typically put down a 25% deposit in the second quarter, unchanged from the previous quarter, and home movers typically borrowed 70% of the property’s value, down from 71% in the previous three months.

Scottish first-time buyers borrowed 2.85 times their income on average, up from 2.74 in the first quarter of 2009; home movers typically borrowed 2.55 times their income, compared with 2.51 in the previous quarter.

Scottish first-time buyers typically spent 14.1% of their income on mortgage interest payments, the lowest share since the first quarter of 2006.

For home movers the proportion stood at 11.1%, the lowest share since the second quarter of 2004.

CML policy consultant, Kennedy Foster, says: “This is encouraging and mirrors the pick up in the housing market.”

However, he cautions: “It will be a slow path to full recovery with significant obstacles presented by the restricted access to mortgage funding, fewer active mortgage lenders in the market, rising unemployment and limited consumer demand.”

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