Mortgage slump deepens as approvals hit new low

THE slowdown in the number of mortgages being provided in Scotland increased in the final three months of 2008, new figures revealed today.

Data from the Council of Mortgage Lenders (CML) showed that only 11,600 mortgages were approved between October and the end of December, down 52 per cent on the last three months of 2007. That compared to a 47 per cent drop in the third quarter of the year.

The shortage of loans for buyers without a deposit of at least 15 per cent of the value of a property – or more for new builds – has been blamed for the sluggish property market.

In the whole of 2008, there were 60,900 mortgage loans in Scotland – the lowest total in a decade and down by 40 per cent on 2007.

In the final three months of the year there was a 23 per cent reduction in lending on the previous quarter – a much bigger decline than the 14 per cent experienced UK-wide.

Crawford McCaughie, CML Scotland's chairman, said: "The downturn in the mortgage market has been slower to hit Scotland, but we are not immune from the funding pressures and reduced consumer demand constraining lending activity across the UK.

"Those borrowers with access to a large deposit are clearly benefiting from falling house prices and lower mortgage rates."

The CML Scotland data also shows that there were 4300 loans to first-time-buyers in the last three months of 2008, down 19 per cent on the previous quarter.

The average first-time-buyer had to have a deposit of 20 per cent, compared to 11 per cent a year earlier. On average, they borrowed 2.8 times their salary, compared to 2.98 a year earlier.

Leslie Deans, senior partner at Leslie Deans & Co, and a member of the ELPG group of property solicitors, said: "These figures are not a surprise and they reflect what those of us in the property industry have been seeing. Last year was very difficult for those looking to secure mortgages because the supply was so low.

"Everyone knows the troubles at the likes of Royal Bank of Scotland and Bank of Scotland to name but two was having a big impact.

"Without mortgage finance, property just will not move. It is like an engine without oil."

He said, however, that recent measures by the Government to insist on further lending in return for rescue funding to the banks was helping the market.

Earlier this week, Northern Rock announced that it is to again offer mortgages at 90 per cent loan-to-value – one of the few lenders currently willing to lend at such a level.

And Mr Deans believes that the recent increase in mortgage availability is boosting the market. He said: "We have seen increased demand in the last 2-3 weeks with considerably increased viewings, and other companies are saying the same."