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Scotland sees increase in property lending to first time buyers

But lending to home mover and remortgage lending was subdued. A total of £570 million was advanced to borrowers remortgaging in Scotland in the first quarter, a 25% fall compared to the first quarter of 2012, and down by 20% compared to the previous quarter.

A total of 4,500 loans were advanced to first time buyers in Scotland, a 10% increase on the first quarter of 2012 at 4,100 loans but there was a seasonal fall compared to the fourth quarter of 2012 when there were 5,300 loans.

Distortions caused by the end of the stamp duty holiday in March last year were less pronounced in Scotland than in the UK overall. Lower house prices in Scotland, on average, means that a larger proportion, typically around 60% compared to 40% in the UK, of first time buyers in Scotland buy properties valued at less than £125,000 that is below the stamp duty threshold.

With lower house prices, first time buyers in Scotland continued to borrow less relative to their income and spend a smaller proportion of their income on mortgage payments than in the UK.
 
First time buyers in Scotland typically borrowed 2.81 times their income and spent 17% of their income on mortgage payments, lower than the 3.23 times borrowed by first time buyers in the UK who spent 19.5% of their income on mortgage payments.
As in the UK overall, first time buyers typically borrowed 80% of their property's value.

A total of 5,500 loans worth £710 million were advanced to home movers, compared to 5,600 loans worth £730 million in the first quarter last year, a 24% fall on the fourth quarter of last year and a 2% fall compared to the first quarter in 2012, likely to be partly associated with the effect of the end of the first time buyer stamp duty holiday in March last year.

Despite the slight fall in home mover lending, the rise in the number of first time buyers contributed to a small increase in house purchase lending compared to the first quarter last year. A total of 9,900 house purchase loans worth £1.1 billion were advanced in Scotland in the first quarter.

With most adults in Scotland still viewing home ownership as their tenure of choice and with more high loan to value mortgages now available, conditions for borrowers looking to either buy or move home are continuing to improve,’ said Iain Malloch, chair of CML Scotland.

‘The announcement of a new build shared equity scheme, the continuation of MI New Home and the launch of the Help to Buy scheme next year, should provide a further boost to the Scottish mortgage market,’ he added.

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