New figures show that the number of loans for house purchases fell 20 per cent during the first quarter of this year when compared to statistics for the same period in 2007.

The Council of Mortgage Lenders (CML), which represent groups responsible for 98 per cent of UK mortgage lending, have identified that 16,000 successful mortgage loan applications during the first three months of 2008. However, the council note that while Scotland saw a tightening of loan approvals, it was less pronounced than in other areas of the country. In the UK as a whole, successful mortgage applications fell by 40 per cent. Scotland now has an 11 per cent share of mortgages nationwide, up from eight per cent in the first quarter of 2007.

Furthermore, demands for remortgaging was found to have fallen only slightly, with 1,000 fewer recorded than the 21,000 noted in last year’s figures. The group attributes the strong performance of remortgaging loans markets to a high number of people coming off fixed-rate deals. Looking at the wider market, CML notes that Scotland’s comparatively stable results may be in part due to a greater affordability of housing in the country. It explains that Scots typically borrow less relative to their incomes when it comes to loans for house purchases, while lower housing costs mean that mortgage responsibilities place less of a burden on their finances than in other part of the UK, possibly making them more favourable borrowers than those elsewhere in the country. The average house price for the whole of the UK was 213,807 pounds in 2007, compared to the Scottish average of 159,157 pounds.

Figures from the group suggest that while mortgage interest payments accounted for 16.9 per cent of the average Scottish worker’s income, in England these contributions account for 18.5 per cent of earnings.

CML Scotland policy consultant Kennedy Foster said: “The shortage of mortgage funding has had a dramatic impact across the UK and we expect the slowdown to get worse before it gets better. However, to date, there has been less of an impact in Scotland than the rest of the UK as affordability is better here, meaning borrowers have been less affected by the tightening in lending criteria. The Scottish government could help to underpin confidence at this uncertain time by increasing their investment in both the new-build and Open Market HomeStake schemes. We estimate that the proposed 2,000 pounds first-time buyer grants will cost 70 million pounds a year. That money would be better targeted at HomeStake schemes.”

The Scottish government plans increase the number of affordable houses in the country from 25,000 to 35,000 by 2015. The CML has announced its support for the timing of its Home Report, which will be released in December of this year. The group states that by choosing this quiet time in the housing market, Holyrood will be in a better position to implement the recommendations of the study.

Elsewhere, Charcol revealed last month that many homeowners in the UK are showing a preference for fixed-rate deals as financial forecasts suggest further turbulence in the housing market.

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