Lenders would be forced to review their mortgage operations and interest rates could rise. That’s the view of leading experts in the event that the Scottish electorate vote for independence in the referendum in September 2014.
A Treasury report has questioned whether Scottish banks could fund a successful financial compensation scheme while lenders have confessed that they would have to review their position in the Scottish mortgage market in the event of a ‘yes’ vote. Keep reading to find out more.
Lenders would be forced to review their mortgage business in the event of Scottish independence
The Scottish Government intends to hold a referendum of the Scottish electorate on the issue of independence from the United Kingdom on Thursday 18 September, 2014. Independence is supported by the Scottish National Party and Scots will be asked to vote on whether Scotland should become an independent country.
In the event of a ‘yes’ vote, Money Marketing reports that lenders’would be forced to review their mortgage operations in Scotland.’ Building Societies Association head of mortgage policy Paul Broadhead says lenders will have to review their position if the electorate choose to leave the UK.
He said that they would need to know what the legal structure will be and what currency they will use. If it’s not part of the UK they would also need to know if it will be part of the FCA regulatory regime. If not, then lenders, who now are obliged to comply with the FCA ruleswill have to review their position. It doesn’t mean they will pull out or the mortgage market but they will have to reassess the risks.
A ‘yes’ vote may also lead to more expensive mortgages north of the border. The Council of Mortgage Lenders believe that when lenders have to deal with different legal and regulatory systems then lending becomes more difficult and more expensive for the borrower.
Could Scottish independence make your mortgage more expensive?
A recent Treasury report argued that a vote in favour of Scottish independence could see the cost of high value mortgages in Scotland rise.
In the event of a ‘yes’ vote, Scotland would be forced under European law to have a separate financial regulatory system and its own deposits guarantee fund, to compensate savers in the event of the failure of a financial institution.
The Treasury report has called into question whether an independent Scotland could set up a financial compensation scheme that was sufficiently well backed. And, without this, the Treasury believes that there could be a loss of confidence in Scottish banks, resulting in customers making fewer deposits to fund mortgages.
John Swinney, the Scottish finance secretary, dismissed such claims, saying that theUK government are using this paper to make implausible claims about what will happen to mortgage rates, when the reality is that many countries around Europe, including those of similar size to Scotland, have substantially cheaper mortgage rates than the UK.
Islay Robinson, CEO of London mortgage adviser Enness Private Clients, said: “A lack of confidence in Scottish banks would mean that they may have to offer better savings rate to attract deposits or fund their mortgages through greater use of the wholesale markets. This could certainly push up the price of large mortgages in an independent Scotland.”
By geralt from Pixabay