Scots mortgage lending at lowest since 80s and trend is downwards

Mortgage lending in Scotland remained at a 30-year low at the beginning of the year - new figures reveal that the total number of loans granted in the first three months of 2011 dropped by 19 per cent compared with the same period in 2010.

Just 8,000 property buyers were granted mortgages to buy a home between January and March, according to new statistics from the Council of Mortgage Lenders (CML).

Meanwhile, separate figures released by the CML showed that UK mortgage lending rose by 12 per cent in May as demand recovered following a run of bank holidays and the royal wedding the previous month.

In the first quarter of the year, the number of loans granted to Scots who sold one property to buy another also dropped by 17 per cent, year on year. A similar decline was experienced across the UK - down 16 per cent from the previous year - while the volume of loans handed out by mortgage lenders in 2010 was similar that in 2009 - the worst year for lending since 1979.

However, the number of remortgages rose in the first quarter of the year, as homeowners scrambled to get a deal secured amid fears of interest rate rises.

"It's no great surprise that mortgage lending figures for Scotland are down on last year," said Graeme Hartley, director of Royal Institute of Chartered Surveyors Scotland.

"Some potential first-time buyers are still struggling to get a deposit together and have accepted they will have to continue renting. Many home owners are choosing to improve their current home rather than move, because they have fears about the economy."

In the first quarter of 2011, there were 3,200 loans to first-time buyers in Scotland, the report showed - an 18 per cent fall from the previous quarter and 20 per cent down on the previous year. The average first-time buyer borrowed 78,155 in the three-month period, up from 76,500 a year earlier - and needed a deposit of 23 per cent in the first quarter of 2011, the same as a year earlier.

Experts said the UK-wide figures for May demonstrated that longer term, lending still remained broadly flat - attributing the rise to "distorting effects" of bank holidays and the Easter break.

A total of 11.3 billion was advanced during the month, up from 10.1bn in April, and also 1 per cent higher than a year ago.

But lending for buying homes was down on a year ago, with the increase being accounted for by remortgaging.

Howard Archer, chief UK economist for IHS Global Insight, said he believed house prices are likely to fall by a further 5 to 8 per cent from current levels."The Council of Mortgage Lenders reported that gross mortgage lending improved modestly in May, having been held back in April by the later Easter this year and by the extra day's bank holiday (for] the royal wedding," he said.

"We believe that modest falls in house prices are likely as squeezed purchasing power, tightening fiscal policy and the possibility of gradually rising interest rates weigh down on potential buyers."

CML director general Michael Coogan said: "Gross mortgage lending in May recovered after low activity levels in April, but the likelihood seems to be for essentially flat levels of lending over the next couple of months."