How will independence affect the Scottish property market?

Finance experts are expressing their thoughts and predictions on the effects that Scottish independence could have to the housing market. Many of the large UK banks are predominantly against the Yes vote — which could result in the banks re-evaluating their Scotland-based business dealings.

The 300 year old union with the UK is under threat by the recent fluctuation in the number of Yes voters. Questions are being raised as to whether voters are aware of the consequences that independence could bring, come this time next week.

Should Scotland part from the UK, a new government led by Scotland’s first minister, Alex Salmond may be forced into generating a new national currency and banking structure — predicted to cause major disruption within the housing market.

David Hollingworth, from broker London and Country Mortgages states, Terms and conditions of a mortgage loan would be likely to remain the same but, if the loan payments are taken in sterling, then suddenly the borrower has a major conversion issue if they’re suddenly being paid in a new Scottish currency,

They would not only be subject to interest loan fluctuations but also exchange rate volatility.

If, as predicted, the new Scottish currency was created and soon depreciates by 10% against the pound, this would also have a negative effect on mortgage. A household with a £1000 monthly repayment, for example, would face an increase of £100 to cover the short term cost of acquiring sterling.

Potentially, Scotland have up to 18 months to set in place the terms in which they become independent, which will partly involve agreeing whether or not to accept responsibility for a share in the UK’s public debt. It’s uncertain whether banks will temporarily continue to lend while these discussions are carried out. However, by not accepting a part in the debt, Scottish homeowners could see an average increase of £5200 a year in mortgage repayments.

First-time buyers will find it increasingly difficult to get onto the property ladder and will no longer have access to the Help To Buy scheme. This, along with the housing shortage, could have a detrimental effect on the recently recovered Scottish property market.

Even owners of Scottish bank, Clydesdale are putting in place contingency plans, should Scotland become independent, and say the Yes vote, may give rise to significant additional costs and risks.

Today's Conveyancer