The credit crunch is having less of an impact on the Scottish property market than in the rest of UK and repossessions in Scotland will be below levels seen elsewhere.

Launching a new series of data on mortgage lending specifically for Scotland, the Council of Mortgage Lenders (CML) revealed that the fall in the number of loans for house purchase in Scotland was only half that experienced for the UK as a whole.  With mortgage lending stronger north of the border, Scotland's share of all loans for house purchase in the UK has risen to 11 per cent, up from eight per cent this time last year. 

Loans for house purchase last year were just three per cent lower than the year before compared to nine per cent for the UK.  While loans for house purchase in Scotland in the first three months of this year were 20 per cent down on the same period a year ago, this is half the 40 per cent decline reported for the UK as a whole.

The CML believes that a key reason for the greater resilience of lending in Scotland is the relative affordability of Scottish property.  The average house price in Scotland is still 25 per cent lower than the average UK house price.  Moreover, borrowers in Scotland typically borrow less relative to their incomes and mortgage interest payments account for less of their income as house prices are more affordable than elsewhere in the UK.  In the first quarter of this year, the average borrower in Scotland borrowed 2.87 times their income, compared with 3.14 in the UK as a whole, and mortgage interest payments accounted for 16.9 per cent of the average Scottish borrower's income, compared with 18.5 per cent in the UK. 

Given the differences between the Scottish property market and the rest of the UK, CML Scotland Chairman, Crawford McCaughie, said he expected repossession levels in Scotland to be lower than elsewhere.  Even then, repossessions in the UK as a whole are not expected to soar.  CML director general Michael Coogan said later that: "We continue to expect the absolute level of mortgage arrears and possessions to remain low, as we forecast in October 2007".  Nevertheless, CML Scotland policy consultant Kennedy Foster said that lending was likely to remain subdued.  The £50 Billion boost to the market from the Bank of England recently would have the desired effect, but it would be 2009 before its effects would be felt in the mortgage market.