MORE than 3000 people in the Lothians are at risk of defaulting on their mortgages because of the credit crunch, according to official figures.
Furthermore, thousands who are not covered by the statistics could be in the same boat.
The news comes at the same time as separate figures show a surge in the number of people going bankrupt.
Today a firm which specialises in buying homes on
the brink of repossession so they can be leased back to their former owners said the number of inquiries it is receiving had quadrupled.
Since April 2005, 630,334 mortgages were sold in Scotland – 21,130 of them to people with a poor credit history.
Sub-prime mortgages – which triggered the US credit crunch – are defined as those targeted at consumers with impaired credit history or low credit ratings who might find it difficult to obtain finance from traditional sources.
No data is available for people with low credit ratings but figures from the Scottish Government show 1840 mortgages in Edinburgh were sold to people with impaired credit history, 2.7 per cent of all city mortgages sold.
The figures for East Lothian, Midlothian and West Lothian were at a similar level, adding up to 3030 mortgages in the Lothians.
In the current economic climate, these are the people seen as most likely to run into problems meeting their payments.
Ken McEwan, managing director of Edinburgh-based property firm McEwan Fraser, which specialises in sale-and-leaseback, said: "We are seeing about 20 inquiries a day, where it used to be about five. It's pretty serious out there. I think we have got at least four years of this and it's going to get a lot worse before it gets better.
"It's quite sad – a lot of people are finding things very difficult."
Edinburgh Pentlands Conservative MSP David McLetchie said the figures reflected the "age of irresponsibility" in terms of lending.
He said: "Some banks and building societies were so desperate to move mortgages off the shelves they were not too fussy about the ability of borrowers to repay and they gave loans to some people who had a previous history of defaulting. It's a classic case of chickens coming home to roost."
Edinburgh mortgage broker Craig Esplin of Fair Deal Mortgages said specialist lenders had given mortgages at higher rates to people who had bad credit ratings.
He said: "High street lenders maybe lent too much in relation to salary and affordability, but they were not usually keen to lend to people with low credit ratings.
"But there were plenty specialist lenders out there last year willing to lend to people with poor credit ratings who may have missed a mortgage payment or two in the past. The main thing is for clients not to bury their heads in the sand. If they are having difficulties, they should get in touch with their lender and see if there is some compromise they can come to."
EVERY CASE IS A PERSONAL TRAGEDYTHE number of people going bankrupt in Lothian and Borders rose from 866 in 2006-07 to 920 in 2007-08, but reached 452 in the first quarter of this financial year. Part of the increase is caused by a change in the law, making it easier for poorer people to go bankrupt.
But Martyn Evans, director of the watchdog Consumer Focus Scotland, said every case represented a personal tragedy.
He said: "Bankruptcy is not an easy option to allow people who've overstretched themselves to escape their debts – it completely changes your ability to live a normal life as a consumer. And bankruptcy doesn't just affect individuals but whole families. The level of unmanageable debt in Scotland is alarming."
The full article contains 629 words and appears in Edinburgh Evening News newspaper.
