How young homebuyers face ‘double deposit’ trap

SCOTLAND’S home report system is freezing out firsttime buyers and leaving them at a disadvantage compared to those south of the Border, an expert has warned.

Glasgow-based mortgage adviser Gerry Hughes said Scots often have to come up with a ‘double deposit’ for their first home.

This is because lenders will only provide mortgages for the amount specified in the home report, not the amount the property is sold for – which can be as much as 25 per cent more, according to Mr Hughes.

First-time buyers are particularly affected as they have no cash from a previous sale which can be used for a deposit or to fund the difference.

Since 2008, Scotland has used a system which requires sellers to provide a home report for residential properties which includes a basic survey as well as the valuation.

Mr Hughes said: ‘Unless you’ve got the bank of mum and dad or someone else helping you out, it can be very difficult.

‘For example, if you have a £100,000 house and you have £15,000 to put down. In reality, that could go for £110,000 so you need £10,000 just to secure the house, and you only have £5,000 left for your deposit. Lenders are reluctant to give out 95 per cent deposits but even then if they do, you will be paying at a higher rate’.

Last year the number of first-time buyers fell by around 11 per cent compared to the year before.

Meanwhile the average deposit put down rose by 8 per cent to £41,442, according to Bank of Scotland.

Mr Hughes said: ‘Buyers today are not getting the same opportunities I got. If you take the earlier example, that five per cent that a first-time buyer misses out on to put towards their home compared to the rest of the UK. People in Scotland are getting a worse deal, it’s a problem.

‘This coupled with the fact we pay more tax in Scotland means that lenders already factor that into their rates so Scots are paying more for mortgages than their compatriots.

‘We should go back to the status quo, the home report system has outgrown its usefulness.’

However, Liam Anstruther, director of the Mortgage Advice Club, believes home reports provide protections to the buyer. He also said the number of homes going for above home report is falling.

Mr Anstruther said: ‘In England you are buying blindly which could end up costing you more if you do discover something wrong with the property.’

‘Scots are getting a worse deal’