Home loans costs would rise sharply in an independent Scotland, driven by increased currency risks and reduced competition as smaller lenders pulled out of an uncertain market, mortgage brokers warned.

UK lenders would face extra complications in managing the home loans of Scottish buyers if the referendum led to the adoption of a different currency and regulatory system.

David Hollingworth, director at mortgage broker London & Country Mortgages, said the departure of smaller lenders was an implied risk in a Yes vote. “The legal rules are already different. If you start getting a change in currency and regulations, that may complicate things to such a degree smaller mutuals decide it’s not worth pursuing.”

Speculation over the financial ramifications of a Yes vote was triggered by a weekend poll putting the independence campaign ahead for the first time.

Mortgage brokers warned that the potential impact on Scottish borrowers had not been widely acknowledged and would affect both the cost and availability of loans.

Ray Boulger, director at broker John Charcol, said the cost of new mortgages “would go up quite sharply” in the event of a Yes vote because the Scottish government was likely to face raised borrowing costs, triggering an increase in the swap rates that lenders use to price fixed-rate mortgages.

In the event of a currency change, lenders based south of the border would recoil from providing “foreign currency mortgages”, he added, reducing the range of products available to Scottish borrowers.

“Over and above the increase in costs you’d expect from higher borrowing costs, there would be extra costs to reflect the fact there’s less competition.”

For Scottish borrowers with sterling mortgages, currency fluctuations would affect not only the affordability of their monthly repayments but also the ratio of the loan to the value of the property: a currency devaluation against sterling would change the balance of asset and liability. “This could be all the difference between having equity and having no equity,” said Mr Boulger.

The No campaign had “failed abysmally” to highlight the housing market risks to people in Scotland, Mr Boulger said. “There’s a real danger Scottish people will walk into this without understanding what the risks are and get a rude awakening in due course.”

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