“Yes” vote could see mortgage payments jump for Scottish borrowers

9th September 2014

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Scottish homeowners have been warned that a vote in favour of independence could result in higher mortgage payments.

An independent Scotland might have to create a new currency in order to be part of the European Union, as the  Chancellor George Osborne does not want it to keep the pound.

As all mortgage contracts are currently set out in sterling north of the border, this change would mean borrowers making repayments in a different currency to their outstanding debts, mortgage broker David Hollingworth of London & Country told the Telegraph.

The fluctuations between the two currencies would create a huge risk for borrowers as the amount they owe would increase and decrease relative to their earning power.

Hollingworth says: “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 a new Scottish currency depreciated by 10 per cent against the pound, a home owner with a £1,000 monthly mortgage payment would have to pay an extra £100 as home loan costs increase relative to income.

On top of this there are question marks over which banks would choose to operate in an independent Scotland and therefore how competitive the mortgage market would be.

There is also some uncertainty over how mortgage regulation would change and whether Government schemes like Help to Buy would continue under a different guise.

2 thoughts on ““Yes” vote could see mortgage payments jump for Scottish borrowers”

  1. Jer says:

    When the threat of Scotland actually becoming independent loomed, the pound fell significantly.
    Yet all commentators are talking only in terms of a Scottish currency weakening against the pound.
    In the interests of balance, if the Scottish currency appreciated by 10% against the pound a homeowner with the mortgage above would be £100 better off, and it’s just as likely.

  2. therrawbuzzin says:

    There will be a currency union,; rUK will desperately need it.

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