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Scottish property lending recovers more slowly than rest of UK, report shows

House purchase activity in Scotland continued to pick up in the final three months of 2009, according to new data released by the Council of Mortgage Lenders. There were 14,200 loans for house purchase in the fourth quarter worth £1.6 billion, an increase of 4% by number and 5% by value from the preceding three months.
But growth in the Scottish market was a little slower than in the UK as a whole which saw a 9% increase in house purchase activity in the fourth quarter and a 62% increase year on year.
The rise in Scotland from the last three months of 2008 was 22% by volume and 19% by value, illustrating how the market improved over the course of 2009 from its low of 7,600 loans worth £785 million in the first quarter., the CML said.
Earlier in 2008, however, the market had been much stronger so the 47,000 house purchase loans advanced over 2009 as a whole was 23% down on 2008 and the fewest in the sixteen years the CML has been producing this data.
As a result of the slower upturn, Scotland’s share of all house purchase loans fell to 8% in the quarter, the lowest share in nearly three years. The 9% share for 2009 as a whole was down from a high of 12% in 2008.
The number of first time buyers in Scotland was unchanged at 5,400 in the fourth quarter. But the value of lending to first time buyers increased in the last three months from £474 million to £479 million, and the number of loans was up from 4,100, worth £368 million, year-on-year.
In line with the rest of the UK, remortgaging volumes remain low in Scotland. There were 9,000 remortgage loans worth £900 million in the fourth quarter, down from 10,000 worth £1 billion in the preceding three months and from 16,000, worth £1.6 billion, in the last three months of 2008. For the whole of 2009, there were 39,000 loans worth £4.4 billion for remortgage, down from 74,000, worth £7.4 billion, in 2008.
As in the rest of the UK, many borrowers in Scotland will still find it difficult to access the more attractive new deals, which are typically only available to those with large deposits, and may prefer to remain on their lender’s variable rate. However, the rebound in prices and slight relaxation of lending criteria will mean that more should become eligible for these products in 2010, the report also said.
‘We do not anticipate an increase in lending activity immediately. Funding conditions remain challenging, economic recovery is fragile both in Scotland and in the UK as a whole, and with little likelihood of interest rates rising this side of an election, many on low variable rates have little incentive to remortgage,’ said CML Scotland policy consultant Kennedy Foster.
‘A combination of bad weather in the early part of the year and the end of the stamp duty holiday will also have affected housing market activity, and will reinforce the slow start to 2010. However, the situation is much improved on a year ago, and a gradual improvement in market conditions and the wider economy should support a modest increase in activity later in the year,’ he added.