David Alexander

The firm said that of the £66,887,491,181 of outstanding mortgage debt in Scotland Edinburgh accounted for 23.9% of the total.

The Scottish capital has had the largest increase in mortgage debt over the last eight years rising by 13.8% to £16,023,520,815 in Q2 2021 from £14,089,605,069 in Q2 2013.

Over the same period outstanding mortgage debt increased by 4.8% across the whole of Scotland with Aberdeen recording the next greatest increase of 7.0%; Glasgow at 5.7%; Inverness on 5.2%; Dundee at 2.7%; and Perth on 1.0%.

David Alexander, the chief executive officer of DJ Alexander Scotland, commented: “The substantial increase in outstanding mortgage debt in Edinburgh is not surprising given the large price rises the capital has experienced in recent years. Demand continues to outstrip supply and the city remains a major destination to live and work in for people from across the whole of the UK.

“Scotland as a whole has seen increases in outstanding mortgage debt across the eight years but in a much more measured way and in line with inflation. The concern may be for Edinburgh mortgage holders is that with interest rates rising, very large debts may become unsurmountable if homeowners have borrowed to their limit. A problem with a mortgage can quickly become an issue particularly if the Bank of England rapidly increases the base rate.

“While I don’t think there is any need to panic there is concern that a generation of homeowners are unaware that interest rates can rise. Being used to rock bottom interest rates for more than a decade may have made people less cautious than they should be when borrowing for a home. A further risk is that higher interest rates may reduce demand and consequently impact on prices causing a slowdown in the market.”

He concluded: “What is clear is that there is only one way interest rates are going at the moment and that is up with a further two increases forecast for this year alone. I would caution homebuyers against letting their enthusiasm for a new home over-ride financial prudence. Always build in the cost of a percentage point or two of interest rate rises when calculating affordability. I don’t believe we shall see base rates at 5% or anything like it in the near future but they are creeping up, and homebuyers must build in any potential rate rise into their budgeting.”