Scotland continues to see subdued mortgage market

Scotland continued to see a subdued mortgage market in Q3 of 2010, broadly mirroring the UK as a whole, according to data released today by the Council of Mortgage Lenders.

There were 13,500 loans for house purchase worth £1.7bn advanced in Scotland in Q3 of 2010, a 5% increase compared to Q2 and a 1% decrease compared to the same period last year. A fall was expected in this quarter due to the effect of the Stamp Duty holiday over-inflating the market at the end of 2009.

The 5,000 loans to first-time buyers worth £444m were up 4% by volume and 5% by value from Q2. Compared to the same period last year, this was a fall of 7% by volume and 6% by value. First-time buyers accounted for 37% of the market in Scotland – 1% more than the UK as a whole.

There was a larger increase in lending to home movers. They were advanced 8,600 loans worth £1.1bn from July to September, an increase of 8% by volume and 10% by value from the previous three months and are the only group to also see an increase from the same period the previous year – of 2% by volume and 8% by value.

As was the case across the whole of the UK, first-time buyers and home movers had begun to see a slight easing in lending criteria as 2010 continued.

This appears to now be reversing with the average LTV ratios decreasing in the third quarter to 77% from 79% for Scottish first-time buyers and to 70% from 71% for home movers in Scotland. The average ratios for Scottish home movers of 70% from July to September compared to 67% for the UK as a whole.

Reflecting the trend across the UK, refinancing activity remained extremely muted in Scotland from July to September. There were 8,000 loans for remortgage worth £800m advanced in Q3, down 1,000 from the previous quarter with no change in value and down 2,000 from a year earlier with the value down £200m.

Kennedy Foster, policy consultant for CML Scotland, says: “Mortgage lending levels in Scotland and the UK as a whole are likely to remain subdued for the remainder of this year and into 2011. We are seeing little consumer demand which, coupled with issues around funding capacity, means that the mortgage market will remain constrained for some time.”