In a recent report it has been claimed that, in the same way as those in England and Wales, many younger people in Scotland are finding themselves frozen out of the property market because of the crippling deposits that lenders are demanding in return for a mortgage loan.
Many lenders are now demanding 25 percent of the property value by way of a deposit and this is something that the average first time buyer in Scotland simply cannot raise, thus leaving them out in the cold when it comes to getting onto the property ladder.
Officials have said that the severe restrictions in the financial markets mean that only those with plenty of cash or with a lot of equity in their current homes are able to access competitive mortgage deals in the current climate.
Many first time buyers who cannot get an affordable mortgage due to lack of deposit are being forced to turn to costly private rented properties, as the lists for social housing steadily grow.
It is claimed that the average deposit level that Scots are being asked for by lenders has increased by 13 percent compared to last year, with most lenders now wanting 25 percent of the property value.
The average two bedroom flat in Scotland is priced at around £100,000, and this means that first time buyers would be looking for a deposit of £25,000 in order to access affordable rate mortgages – a feat that many cannot achieve given that they have no former property from which to take equity.
One estate agency official said: “The onerous requirements for deposits of at least 25% are greatly limiting most people’s ability to get on the housing ladder. If the flow of first-time buyers is restricted for too long then it will impact negatively on the market as a whole. We’ve witnessed a palpable increase in banks’ willingness to lend money in recent months, but there hasn’t been a great deal of loosening of the criteria. You can still get products that don’t require you to give a 25% deposit, but you’ll pay a hefty premium percentage rate. Banks will argue they’re only rebuilding their balance sheets as they’ve been instructed to do by government, but there are some pretty healthy margins out there – especially if people don’t have the 25% deposit.”