The title of this blog refers to a question that is now actually being asked to prospective mortgage applicants in the lender’s quest to ascertain whether the applicant can afford the mortgage and meet the new mortgage requirements. Whilst I applaud the intent of the new affordability system, the unforeseen consequences are an immediate disaster in relation to clients trying to finalise their house purchases, which in most cases, would have been proceeding smoothly until the lender revisited the mortgage affordability requirements. In the medium term it is causing a huge brake on the Scottish property market and is putting an awful lot of extra pressure on purchasers and solicitors alike with no purchaser now being prepared to commit to conclude missives until their solicitor actually holds loan papers in his hands. This is a significant change in the Scottish house buying and selling process. Previously, certainty was achieved by an orderly progression towards concluding the missives, usually some time prior to the date of entry. This allowed the purchaser and seller peace of mind and allowed the seller, looking to buy, time to move on his purchase. This is definitely increasing my feeling that we are in for a summer of uncertainty in relation to the housing market.
I am also concerned with the recent murmurings from the Governor of the Bank of England expressing his concerns regarding an overheating housing market. Whilst I agree that there are clear signs of overheating in the southeast of the UK in general and London in particular, I was interested to hear from The Royal Bank of Scotland, who indicated that the vast majority of purchases in London either have very small loan to value mortgages, if any mortgages at all. Therefore the overheating that is taking place in London causes little or no threat to the UK mortgage banks.
I am concerned that a mallet will be used to crack a nut and the green shoots of improvement that we are seeing in the Scottish housing market will be killed off before they really take root. Whilst I am still of the opinion that the property market is moving in the right direction I am concerned that we are in for six months of uncertainty.
I will keep you advised of trends.Lindsay Darroch Partner – Head of Property