BANKS should treat Scottish customers more favourably than their English counterparts because the housing market in Scotland is more resilient, the SNP housing minister has said.
According to the latest quarterly figures from Nationwide, covering the six months to the end of June, last month Scotland's average house price was still rising – at an annual rate of 0.6 per cent. OK, it is growth, but hardly stellar.
Stewart Maxwell said he would "encourage" any moves by mortgage lenders to take into account the fact Scotland's housing market has not been hit as hard by the credit crunch as England.
Regions of England are bucking the downward trend, regions of Scotland are struggling; following Mr Maxwell's logic, then banks in Bolton and Edinburgh should also have their own set of individual mortgage criteria.
This could mean a relaxation of the strict loan criteria for buyers in Scotland.
Improved products for the Scottish market could include mortgages with a higher loan-to-value ratio than is currently on offer, or a larger loan based on a higher salary multiple.
One of the reasons that so many mortgage-providers are now struggling is that in the late 90s, early 00s they dumped traditional lending practise....
ie ensuring:
1. The borrower will, bar a nuclear war, be able to meet the monthly payments for the full period of the loan.
2. If that nuclear war does occur, the bank is able to sell the property, pay off its original loan .
...in favour of throwing the cash at basically anyone who came through the door. There are good sound reasons for the present restrictive loan-to-value ratios and salary multiples and they’re not based on the question of national identity.
However, the idea that the Scottish housing market is insulated from the worst of the downturn is not universally accepted.
Michael Luck, the managing director of Scotland's largest estate agents, Slater Hogg & Howison, said recently: "Scotland has followed exactly the same trend as England. It is no better up here than anywhere else."
A spokeswoman for CML told The Scotsman that the housing downturn was not the only reason for the tight mortgage market UK-wide.
She said: "There are many reasons why lenders chose to tighten up their mortgage criteria and the fall in house prices is just one of them. There is a shortage of funding in the lending markets, which constrains lending across the UK. We just don't think this idea would work."
Leave aside your political prejudices for a second, who would you trust with your deposit?
Mr. Maxwell or the experts that actually know what they are talking about?
2 comments:
o'neil
Put aside all the London based woe is us bullshit. Scotland is largely unaffected apart from catching the jitters from what passes as a supposedly national news. Myself, family and friends are involved in various industry, finance and transport. The housing market is at worst steady, although the jitters have put a hold on some new builds. Industry has several years worth of build orders for new premises, in fact many English companies are on our sites and transport is as busy as ever.
The worst scenario is that we are just slow in following England. I am not so sure. If memory serves even our unemployment figures were down.
A little snippet from the bottom of the article which I missed:
The latest Lloyds TSB Scotland house-price monitor showed the number of homes being bought and sold dropped by 27 per cent in the three months to 31 July. It also said that, across Scotland, the average price of flats was down 1.7 per cent to £134,050, with detached homes down 1.2 per cent to £260,684. .
But it's aside from my main point, the "strict" mortgage criteria which everyone is talking about is actually reverting back to the tried and trusted formulae of old (ie no 100% lending, 2.5/3 times salary multiples in terms of what you can borrow, total loan payments equaling 30-40% of your disposable income). Those figures weren't pulled out of the air by the banks and building societies, they were as strong (as can be possible) guarantees that customers and banks didn't overstretch themselves with their borrowing. One of the reasons for the crisis hitting institutions such as Northern Rock is that those principles were pushed under the carpet in favour of a quick, risky buck. Loosening such criteria in Scotland in the long term won't help borrowers.
Having said all that, i've just read about Brown's "Rescue" package which once again is going against sound economic principles for the sake of short-term populism.
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