Last week a report by the Council of Scottish Mortgage Lenders revealed that Scottish home movers have increased the amount they borrow to buy a home by £8000 since the first quarter of this year.  On average, first time buyers borrowed £5000 more than they did in the first three months of this year.

Does this mean that rising house prices are forcing home buyers to take out unaffordable loans?

Surprisingly no.

The same report suggested that average mortgage payments relative to pre-tax income had in fact fallen in the last quarter. The proportion of gross income taken up by mortgage payments for first time buyers in Scotland fell slightly from 16.9% to 16.7% - well below the national average of 19.4%.

It might seem a bit strange that buyers are borrowing more and sacrificing less of their income but as market analyst Mark Hordern suggests, there are good reasons for it:

"Firstly, interest rates are low and competition between lenders is helping to keep them there. Mortgage Strategy, the leading trade publication for the industry, reports that banks are cutting mortgage rates as competition for credit worthy borrowers heats up.

Secondly, it looks like incomes have grown. The CML reports that the average household income of a first time buyer has risen by almost £2,000 between the first and second quarters of the year from £30,700 to £32,100. The same is true for home movers whose typical household income has grown from £47,400 a year to £49,100. As a result, the ratio of house prices to incomes in Scotland has remained virtually unchanged.

True, not everyone is seeing their income rise and no doubt buyers will tend to be those who are seeing an improvement in their financial circumstances. Nevertheless, and for all the talk of an unsustainable house price boom, there's no sign yet that buyers in Scotland are experiencing an 'affordability crunch'."

Contact Blair Cadell today for a free pre-sale valuation and market appraisal of your property from our expert team. At Blair Cadell we look after your complete purchase transaction including mortgage matters, contract and conveyancing, up to the day you receive the keys to your new property, all at a single fixed cost.

(Image: FlickrCC/KeithWilliamson)