First time buyer sales driving lending growth

Home buyer lending in Scotland was up 35 per cent by value in the second quarter of 2017 - more than any other three month period since 2007 - according to new figures from the financial trade body.

Lending has risen by 35 per cent in Scotland.
Lending has risen by 35 per cent in Scotland.

Meanwhile, the number of loans rose by 30 per cent to 18,800 loans compared with the previous three months and up 15 per cent on the second quarter of 2016, according to figures published by UK Finance, the trade association for the finance and banking industry.

Property experts said that the increased number of loans reflected the house price rise in Scotland’s major cities, as well as increased rents, which are giving prospective first time buyers the impetus to buy due to the comparable cost of a mortgage.

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First-time buyers borrowed £1.1bn, up 29 per cent on the first quarter and 17 per cent on the second quarter last year. This totalled 9,500 loans, up by a quarter compared to the previous three months and 15 per cent year-on-year.

The rise in Scotland was the highest of the UK nations, with lending increasing by just 17 and 26 per cent in Northern Ireland and Wales respectively. In London, the amount lent to borrowers rose by just 11 per cent.

Orlaith Brogan, spokeswoman for SPC Scotland, which represents property solicitors north of the border, said: “These results show a marked increase in the total amount being borrowed by property buyers every year as well as an increase in the number of individual loans. The total value of loans has increased by 18 per cent year on year, indicative of the price increases in many of Scotland’s cities. But with the number of new loans increasing year-on-year, this is perhaps indicative that in Scotland it is still possible to find an affordable home outside of the main cities for £60,000.

“There has also been a slight cooling off in the buy-to-let market on the back of the second homes supplementary tax introduced last year, with the aim of allowing first time buyers to get their foot on the ladder. Another reason for an increase in new loans amongst first time buyers is because of the upward pressure of rent on tenants, where a monthly mortgage payment could be cheaper than renting, particularly in Edinburgh and Glasgow.”

She added that Aberdeen city centre house prices were down by 4.8 per cent year on year, but that sales volumes have increased by 10 per cent over the same period, indicating that the city may be in recovery, following a housing market dip driven by uncertainty in the oil and gas sector, which drives the local economy.

Home movers borrowed £1.5bn, up 39 per cent quarter-on-quarter and 20 per cent compared to a year ago. Meanwhile, remortgage activity totalled £900 million north of the border, down seven per cent on the first quarter but up by the same amount on the same quarter last year. This came to 7,300 loans.

Carol Anderson, chair of the UK Finance Scotland Mortgage Committee, said: “There were more home buyers in Scotland in the second quarter of 2017 than any other quarter since 2007. First-time buyers have been a key driver of this, with two years of year-on-year growth.

“With an economic climate of low interest rates, government schemes and competitive mortgage deals, the Scottish market is in a good position and open to business going forward.”