The average Scottish home buyer borrowed 2.75 times their income in 2010, compared with 3.03 for the UK as a whole although they borrowed 74% of their property's value which was similar to the UK's 73%.
2010 saw 46,800 loans advanced for house purchase in Scotland, less than 1% down from 2009. The UK as a whole saw house purchase lending increase by 3% from 2009. Reflecting the trend across the UK, refinancing activity was subdued in Scotland.
There were 30,000 remortgage loans advanced, down 23% compared to 2009. This was the same fall experienced by the UK as a whole for remortgage loans. Lending in Scotland accounted for 9% of total UK lending in 2009 and 2010.
In the fourth quarter, house purchase lending activity fell by 22% and remortgaging by 13% compared to the third quarter. There were 10,500 house purchase loans advanced (worth £1.2 billion), 28% down on the last quarter of 2009.
And 7,000 loans for remortgage (worth £700 million) advanced, down 22% on the same period in 2009. These year-on-year falls can be explained by the distorting effects arising from the artificial boost in activity in December 2009 to beat the stamp duty holiday deadline.
For first-time buyers, the final three months of the year saw 3,800 loans (worth £324 million) advanced. This was 22% down on the previous quarter and 31% down on the final quarter of 2009.
Just like in the UK as a whole, the easing in credit criteria in Scotland reversed slightly in the fourth quarter, with first-time buyers needing to borrow 76% of their property's value, down from 77% in the previous quarter and 79% in quarter two. They also took out loans, on average, 2.86 times their income, a slight fall from 2.89 in the third quarter but only needed 11.7% of their income to cover the interest payments.
For home movers, the 6,700 loans (worth £866 million) were 21% down from the third quarter and 26% down from the previous year.They continued to take out larger loans as a proportion of the property value than those in the UK as a whole, with the last quarter of the year seeing an average loan to value of 70% compared to the UK wide 68%.
Like first-time buyers, they have also seen small fluctuations in income multiples. Their average income multiple was down slightly to 2.65 from 2.67 in the previous quarter but their interest payments took only 9% of the borrowers' incomes, the lowest proportion for Scotland since CML records began in 1974.
CML Scotland policy consultant Kennedy Foster said:
"The challenge of the dysfunctional mortgage market applies across the UK and the impact which this has on first-time buyers and second steppers is no different in Scotland. The root causes of the shortage of funding, increased capital requirements, particularly for high loan to value lending, and a lack of competition are constraining the market in Scotland, as in the rest of the UK.
"In its housing strategy paper "Homes Fit for the 21st Century", the Scottish Government indicates it is looking for innovation in the mortgage market to provide funds for responsible first-time buyers.
"We look forward to working constructively on this with both the Scottish Government and the house building industry to address the considerable challenges to be met before the market can be classed as normal again."
