The shortage of funding is continuing to restrict the availability of mortgages across the UK. In Scotland there were 16,000 loans for house purchase in the first quarter of 2008, down 20% on the same period last year. However, in the UK as a whole, loans for house purchase fell by 40% in the same period.
Scotland's share of all loans for house purchase in the UK has risen to 11% in the first quarter from 8% in the same quarter a year ago. As in the rest of the UK, remortgaging in Scotland is stronger than lending for house purchase. Demand for remortgaging in Scotland has only decreased slightly; there were 20,000 remortgage loans in the first quarter of 2008 and 21,000 in the first quarter of 2007. Remortgaging activity remains strong across the UK as large numbers of borrowers are exiting fixed-rate mortgages.
One of the reasons that the slowdown has not been as great in Scotland may be that houses still remain comparatively affordable and so borrowers may not have been affected to the same extent by the tightening in lending criteria in recent months.
CML Scotland policy consultant Kennedy Foster said: "The shortage of mortgage funding has had a dramatic impact across the UK and we expect the slowdown to get worse before it gets better. However, to date, there has been less of an impact in Scotland than the rest of the UK as affordability is better here, meaning borrowers have been less affected by the tightening in lending criteria.
"The Scottish government could help to underpin confidence at this uncertain time by increasing their investment in both the new-build and Open Market HomeStake schemes. We estimate that the proposed £2,000 first-time buyer grants will cost £70 million a year. That money would be better targeted at HomeStake schemes. We called upon them to consider this in our response to their recent housing consultation paper, Firm Foundations."
