The UK’s eyes are going to be fixed on Scotland next week as they vote on whether to break away from the rest of the UK and become independent or to stay put..
One thing to consider is how mortgages will be affected. A successful vote to break away could make monthly mortgage repayments harder for those in the northern country.
As usual, it all comes down to money, and how it will work. Chancellor George Osborne is reportedly adamant that Scotland won’t be able to keep the pound.
One of the options open for an independent Scotland is to create its own currency, which could create a tough and messy situation for anyone with mortgage payments to make.
The problem arises from differing interest rates and the instability of a newly formed currency in the global market. An expert from broker London and Country mortgages, David Hollingworth, said: “Terms and conditions of a mortgage loan would be likely to remain the same but, if the loan payments are taken in sterling, then suddenly the borrower has a major conversion issue if they’re suddenly being paid in a new Scottish currency.”
It may take up to 18 months for Scotland to break away completely from the UK if the ‘Yes’ vote wins, but if things get heated, a new form of currency could be pushed through, leaving Scottish homeowners vulnerable to the “conversion issue”.
It is expected that a new currency would immediately depreciate by 10% against the pound, meaning that homeowners may have to make up this extra 10% themselves on their payments.
In addition, banks and lenders are worried about business, and an independent Scotland could well alter how they conduct business, and it isn’t necessarily guaranteed they will lend in the new currency.
Whether or not Scotland actually will be forced out of the pound by Westminster, or whether it is an empty threat in an attempt to scare voters into a no vote, has yet to be seen, and then only if they do vote to break away.
