Weekly Q&A With Ed Mead And Andrew Montlake - Week 22

Weekly Q&A

Weekly Q&A With Ed Mead And Andrew Montlake - Week 22

A weekly questions and answers session with Ed Mead and Andrew Montlake

    It has been very interesting watching the debate on Scotland. One issue is around mortgages and the effect on availability and pricing if there is a yes vote. Whilst we have already seen the Pound weaken and the aforementioned banking institutions share prices take a tumble, the knock on effect of this uncertainty would probably hit mortgage availability and pricing for us all.

    Undoubtedly those in Scotland would suffer most as many mortgage questions would surface pretty quickly. Who regulates them, how does a lender repossess if they need to and what are the new sets of rules?

    This is all quite apart from the fact that an English bank could suddenly find itself lending in one currency on a property in another country with potentially a different currency.This would in effect mean that most Scottish borrowers would have a foreign currency mortgage as lenders are unlikely to shift the loan out of Sterling. Therefore borrowers would be at the risk of currency fluctuations which could see mortgage balances increase relative to values leading to less or even negative equity.

    It could of course work the other way but with large employers leaving Scotland, even if it is just a case of “Brass Plaques” rather than wholesale staff relocation’s, house prices could also take a hit. As reported in some sections of the press there is already talk that some buyers have a clause in their contract that they will only actually pay the agreed price in Scotland if the no vote is successful.

    Another point, is that those with mortgages in sterling would also be at the mercy of the Bank of England in any case, especially when they begin to increase rates.

    When all is said and done, historically speaking lenders have always taken the same approach in the face of uncertainty; they pull out. So many lenders could pull out of lending in Scotland for the time being until things are more settled following a yes vote.

    The ripple effect of all this means the cost of funds for some of the main banks going through technical relocation’s, as well as generally, could rise which would be passed on to the borrower in the form of higher mortgage rates, especially if bond rates are effected.
    Comment ()
    @Mark_Chalky what is the average deposit, as a %, buyers have been putting down since MMR and is it higher or lower than before?
    Comment ()
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