Scottish buyers see house price gap narrow as mortgage costs rise

The gap between house prices and earnings in Scotland is beginning to narrow, although rising mortgage costs continue to put pressure on buyers.

Data from the Bank of Scotland shows the typical Scottish home now costs 5.3 times average earnings, down from 5.4 a year ago.

The average property price rose 3.9% over the past year to £223,277, while earnings increased by 5%, helping to narrow the affordability gap.

Higher interest rates mean borrowing costs have increased

According to the data, while house prices have become more affordable compared to earnings, higher interest rates mean average monthly mortgage repayments in Scotland have increased over the last year, rising from £793 to £863, an increase of 9%.

The data also shows that a typical first-time buyer in Scotland would need to save almost £17,000 for a 10% deposit, making it one of the biggest barriers to homeownership. However, this is significantly lower than the UK average of around £24,000.

Isla Benzie, head of mortgages at Bank of Scotland: “House prices and earnings in Scotland have moved broadly in step over the last year, helping to keep the gap between incomes and property prices relatively stable.

“However, that doesn’t tell the whole story. Higher interest rates mean borrowing costs have increased, while saving for a deposit remains one of the biggest hurdles facing many people hoping to buy their first home.

“For many buyers, where they choose to live is one of the biggest factors shaping affordability. Areas such as Inverclyde, Aberdeen and Dundee continue to offer some of the most affordable homes in Britain, while parts of Edinburgh and the surrounding areas are considerably more expensive.

“For those with flexibility over where they buy, relatively small shifts in location can make a substantial difference to what is within reach.”

Housebuilding in Scotland plummets

The news comes as housebuilding in Scotland has fallen to its lowest level in a decade, with the number of homes completed at its lowest level since 2015 and new starts at their lowest level since 2013.

Data released by the Scottish government shows that housebuilding activity in Scotland has slowed, with fewer social and new-build homes being delivered.