Scottish homeowners may face £1bn in extra mortgage bills, minister warns

By SCOTT MACNAB
Published on 25/06/2012 02:34

Homeowners could face £1 billion of extra mortgage costs in an independent Scotland, according to a Treasury minister.

Scotland’s budget deficit and lack of an independent financial track record could mean higher borrowing costs and a rise of one percentage point in interest rates, Chief Secretary to the Treasury Danny Alexander said.

Mr Alexander said: “We’ve said before that if interest rates went up by 1 per cent that would cost families across the UK about £10bn in extra mortgage costs, so it’s likely the same 1 per cent rise would cost families in Scotland up to an extra £1bn.”

His claims have been dismissed by the Scottish Government.

A spokesman for finance secretary John Swinney said: “This is economic illiteracy from Danny Alexander, which is deeply worrying considering his position in the Tory-led coalition.

“He has just demonstrated that he doesn’t know the difference between mortgage availability in the private sector, and government bond issues.

“Banks base their mortgages on the interest rate set independently by the Bank of England, which in a sterling zone would be exactly the same for Scotland as for England.

“The other issue affecting mortgage rates is the ability of banks as commercial businesses to borrow on the markets – and as we have just seen, with the downgrade of 15 global banks and financial institutions, that has nothing to do with the country they are based in.”

Labour shadow Scottish secretary Margaret Curran said that the Bank of England would be “a foreign bank” under independence setting interest rates for Scotland.