THE Bank of England has intervened in the housing market for the first time by pledging to cap the amount of high loan-to-income mortgages that lenders can dish out.
But if you're hoping to buy property north of the border any time soon, fear not; the move is unlikely to affect your chances of obtaining a mortgage in the near future. In fact, new research suggests that thousands of Scots could get on the property ladder for the first time this summer - and still borrow within their means.
The latest survey from Nationwide this week found house prices in the second quarter were on average flat in Scotland - but up 7.6 per cent in London. Average prices for first-time buyers in the English capital have rocketed by 26 per cent to £351,783, or nine times average salary, the highest ever recorded and almost twice the 4.9 times salary for the UK as a whole.
Thankfully, Scottish borrowers are protected from this excess, which the Bank of England's measures are trying to tackle. The Council of Mortgage Lenders says a typical buyer north of the border is only borrowing 2.98 times their income, compared to the UK average of 3.42 in the first quarter of this year, attributing this to "comparatively lower property prices".
The Herald has analysed data from the LSL Property Services Group and discovered that the deposit expected from first-time buyers in Scotland has now dropped below the UK average - 14.03 per cent compared to 16.7per cent. Furthermore, the amount required upfront to get a mortgage has fallen in the last six months alone. In December, the average deposit for Scottish first-time buyers was at the current UK level of 16.7 per cent.
This allowed 6,100 first-time buyers to get onto the Scottish property market in the spring, making it the fourth most active region for first-time buyers in the UK. They were looking at a typical property price of £106,916, meaning the average mortgage taken out was £89,224. This is slightly higher than the £88,657 at the end of last year, but experts say this does not mean that first-time buyers are biting off more than they can chew.
Bigger mortgages can partly be explained by a modest rebound in the Scottish property market. Separate research from LSL has shown that average prices grew by 4 per cent in the last year, with hotspots like East Renfrewshire seeing a 15.1 per cent spike in property values over that time.
However, when compared to London and the south east of England, buyers do not have to stretch their borrowing too far. Philip Hogg, chief executive of Homes Scotland, said: "As all commentators have recognised, there are no signs of a housing bubble in Scotland where market recovery is still very fragile. This is in stark contrast to the conditions in London."
Gerry Weir, director of Edinburgh-based Cornerstone Mortgages, said that prices in the capital are only just starting to match or exceed the valuations contained in home reports. He added: "In the last five or six years, you would be lucky to match the home report valuation but since the early part of this year, properties have been finally going for more. A home initially valued at £750,000 is now selling at £770,000, which we haven't seen for many years."
However, he said borrowing was ticking along at an "affordable level" for his clients, who were also seeing a longer and more thorough mortgage application process thanks to the Mortgage Market Review, which was introduced by the regulatory authorities in April.
Nonetheless, predictions that interest rates will rise are prompting canny Scots to lock into ever longer fixed-rate mortgages to avoid a sudden escalation in their mortgage repayments.
Mr Weir said: "We have never advised so many people to lock into five-year rates and lenders are also offering very attractive ten-year rates that we're quick to recommend.
"It goes against the psyche of the British consumer, who have a history of preferring two-year deals back-to-back but lots of borrowers recognise that rates are low and there will almost certainly be a rate rise in the next couple of years. They would not have considered locking themselves into fixed rates even two years ago, but many are surprised to see ten-year deals available at 4per cent or less."