SCOTTISH homeowners and businesses will be hit from mid-summer by a triple whammy of rising mortgages, job losses and higher prices in the shops, according to leading economic experts.
They estimate that the after-shocks from the international financial crisis which reached a climax last week will hit the country from July onwards.
The credit crunch will lead to rises in mortgage costs and to businesses shelving expansion plans.
First-time buyers will be hit by the end of special deals aimed at encouraging buyers.
And those aiming to sell can expect lower demand and therefore falls in prices.
World markets have been plunged into turmoil after hundreds of thousands of 'sub-prime' homeowners in the United States found that they could not pay back their mortgages, and their homes were repossessed.
Banks have had to write off billions of pounds of loans and have faced their own crises. The British bank Northern Rock was nationalised, and the US institution Bear Stearns, was taken over at a rock-bottom price as it faced collapse.
Scotland is particularly vulnerable to the crisis because of its thriving financial sector which, it is feared, could suffer job losses, as fewer deals are brokered, and banks cut staffing.
Yvonne Brady a partner at Dundas & Wilson, who advises on company insolvencies, said: "If the Scottish market thinks we don't have a sub- prime problem then they are wrong.
" Scotland won't escape unscathed. We'll feel the effects in the second half of the calendar year."
Dougie Adams, adviser to the Ernst & Young Scottish Item Club of economists, said he now fears for the Scottish financial services. He said: "Where I have my fears is in the transactions through financial services.
"Financial services is such a big part of the Scottish economy – it accounts for 8% of the GDP – and at the moment the financial services sector is gumming up. That could cascade through to jobs in the financial services sector in Scotland. ."
While UK and Scottish banks have been less reckless in lending to borrowers with poor credit than their US counterparts, recent "overlending" saw borrowers able to get as much as six times their salary and potentially at risk through redundancy or interest rate increases. Borrowers coming off fixed-rate mortgage deals will find themselves paying more for their loans because banks no longer have as much money to lend.
"A 1% increase in the rate for a £150,000 mortgage will add up to £109 a month to repayments.
However, a Scottish Government spokesman said: "We are confident that the sector in Scotland is internationally competitive and can respond to these challenges."
The full article contains 444 words and appears in Scotland On Sunday newspaper.
