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Homebuyers beginning to practice prudence


  • A quarter of housebuyers looking to avoid mortgaging to the max
  • 20% of homeowners are prepared to cut back expenditure to afford their home
  • A third of first-time buyers cutting back lifestyle to make first home a reality

Housebuyers across Scotland are increasingly stepping back from the edge of affordability to reduce the risk of mortgaging to their financial limits as the possibility of the fifth interest rate rise in under a year looms large.

New research from Clydesdale Bank's Mortgages team suggests that the Bank of England's measures for reining back rising house prices and curbing inflation are beginning to grip as almost a quarter of buyers (24%) admit they are looking to avoid taking out a maximum mortgage.


With minimal reserves to fall back on, even first-time buyers desperate to get a foot on the property ladder are beginning to demonstrate greater caution. Clydesdale Bank's research found almost a third (31%) intend to avoid stretching their finances from the outset for fear a further rate rise might tip them over the edge of affordability. More than seven out of 10 people (72%) anticipate further rate rises over the next twelve months. Despite this, three-quarters (75%) of those surveyed also expect house prices to continue to rise over the next twelve months.


Perhaps surprisingly, only 2% said they were considering changing to a cheaper mortgage to save money. Among first time buyers hoping to get onto the property ladder, almost a quarter (24%) would prefer a fixed rate mortgage to give some payment certainty in the next few years.


Steve Reid, Clydesdale Bank's Director of Retail Banking, said: "Our survey shows that all the signs are that the market will remain strong. Homebuyers aren't panicking - but they are being prudent. With rises in the Bank of England's base rate, and with many economists predicting a further rise in the near future, it is inevitable that homebuyers will become a little more cautious with their borrowing.


"Buyers are taking a realistic view of what they can and can't afford and are looking to protect themselves against unforeseen changes in their personal circumstances. They are shrewder than when the housing market was at its most buoyant, both in the price they're prepared to pay for a home and how they choose to finance it."


A man's home is still his castle


Despite feeling the squeeze currently with Bank of England's Base Rate at a six year high, Clydesdale Bank's research shows that many homeowners are prepared to make cutbacks in other areas of their life in order to afford their home. A fifth (20%) felt that owning their home is so important to them that they will forgo holidays, nice cars and other luxuries to fund it.


The survey showed that this was particularly true for would-be first time buyers eager to get onto the property ladder. Over a third (36%) were prepared to adapt their lifestyle to make that elusive first home a reality.

Steve Reid said: "Scots clearly place great pride and importance in owning their own home and are prepared to make sacrifices to do so - despite the effects of rising interest rates, higher energy bills, increases in council tax and growing personal spending."


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