There were 47,000 Scottish house purchase loans advanced over 2009, down 23% on 2008 and the fewest in the sixteen years the Council of Mortgage Lenders has been producing the data.
As a result of the slower upturn, Scotland’s share of all house purchase loans fell to 8% in Q4, the lowest share in nearly three years. The 9% share for 2009 as a whole was down from a high of 12% in 2008.
There were 14,200 loans for house purchase in Q4, worth £1.6bn – up 4% by number and 5% by value from the preceding three months.
Growth in the Scottish market was a little slower than in the UK as a whole – which saw a 9% increase in house purchase activity in Q4 and a 62% increase year on year.
The rise in Scotland from the last three months of 2008 was 22% by volume and 19% by value, illustrating how the market improved over the course of 2009 from its low of 7,600 loans – worth £785m in Q1.
The number of first-time buyers in Scotland was unchanged at 5,400 in Q4. But the value of lending to first-time buyers increased in the last three months from £474m to £479m, and the number of loans was up from 4,100 – worth £368m year-on-year.
Home movers saw a rise in activity from 8,400 loans, worth £1bn in the Q3 to 8,800 – worth £1.1bn in Q4.
Neither home movers nor first-time buyers saw much change in size of deposits or income multiples but mortgage interest payments as a proportion of income, one of many ways to assess affordability, fell significantly, particularly for the latter group – from 14.2% of income in the third quarter to 13% in Q4. This is the lowest level since 2004.
In line with the rest of the UK, remortgaging volumes remain low in Scotland. There were 9,000 remortgage loans , worth £900m in the fourth quarter – down from 10,000 – worth £1bn in the preceding three months and from 16,000 – worth £1.6bn in the last three months of 2008. For the whole of 2009, there were 39,000 loans – worth £4.4bn for remortgage, down from 74,000 – worth £7.4bn in 2008.
Kennedy Foster, policy consultant at CML Scotland, says: “We do not anticipate an increase in lending activity immediately. Funding conditions remain challenging, economic recovery is fragile both in Scotland and in the UK as a whole, and with little likelihood of interest rates rising this side of an election, many on low variable rates have little incentive to remortgage.
“A combination of bad weather in the early part of the year and the end of the stamp duty holiday will also have affected housing market activity, and will reinforce the slow start to 2010. However, the situation is much improved on a year ago, and a gradual improvement in market conditions and the wider economy should support a modest increase in activity later in the year.”