Your money

Would my mortgage go up?

Q: Would my mortgage go up?

Your mortgage is a contract with your lender - independence day changes neither the balance, the currency, nor the direct debit. Rates follow economic management, and the biggest rate shock in living memory happened inside the union.

The short answer

Your mortgage is a contract between you and your lender. On the morning after independence the balance is the same, the lender is the same, the currency is the same and the direct debit goes out as usual. Independence day has no mechanism for rewriting private loan agreements, and no serious analysis in either referendum campaign claimed it did.

The question actually being asked is what happens to interest rates in the years that follow. That is the currency question at household scale, and it has honest answers. They are less dramatic than the 2014 scare stories, and considerably less dramatic than what UK mortgage rates actually did while Scotland stayed in the union. Both halves of that sentence are documented below.

Sterling loans stay sterling loans

When states separate, private contracts carry on. Legal analysis of Scottish independence expects an independent Scotland to adopt all existing law unless specifically amended or repealed, mirroring what Ireland did in 1922 - and contracts, including loan agreements, continue with their terms intact (Herbert Smith Freehills). A mortgage written in sterling remains a sterling debt owed to the same lender. The precedents behave: Irish borrowers in 1922 simply carried on in sterling, and when Czechoslovakia split in 1993 the two states converted balances at one to one, by stamping the notes, in about a week (History & Policy).

One honest caveat. Parliaments can redenominate: every currency changeover in history has worked by a law converting balances at a set rate, the euro included, and a future Scottish Parliament introducing a Scottish pound would legislate a conversion rate for contracts under Scots law (Herbert Smith Freehills). Redenomination changes the unit on the statement; it does not tear up the loan or invent new powers for your lender. And current Scottish Government policy is to keep sterling after independence, moving to a Scottish pound only later (Building a New Scotland), so under the stated plan your mortgage stays in pounds sterling for the whole transition.

What actually sets your rate

Two things, and the constitution is neither of them. UK mortgage prices track Bank Rate, set by the Bank of England's Monetary Policy Committee, plus your lender's own funding costs in the financial markets - which is why your rate sits above Bank Rate, and why fixed deals reprice when markets move before the Bank does (Bank of England explainer). Bank Rate currently stands at 3.75%, down from its 2023 peak of 5.25% (Bank of England).

Under continued sterling use - the Scottish Government's stated first phase - sterling debts keep pricing off sterling. The Bank of England sets Bank Rate and sterling markets set funding costs, exactly as now. What Scotland would lack in that phase is any say over the Monetary Policy Committee, a real limitation set out honestly on our currency page.

Under a later Scottish pound, a Scottish central bank sets rates, and it needs saying plainly: a new currency can carry an initial risk premium, meaning markets charge extra until the new institutions prove themselves. Its size would depend on the fiscal credibility of the Scottish government, the reserves behind the central bank, and the debt settlement negotiated with the rest of the UK. In 2014, NIESR put the plausible premium on an independent Scotland's government borrowing at 0.7 to 1.65 percentage points (Money Marketing). That is a real cost, and the nearest precedent shows how it can be managed down: Ireland introduced its own pound in 1928, pegged it one to one with sterling, and held that parity for over fifty years, with Irish rates tracking British ones throughout (Central Bank of Ireland, Quarterly Bulletin 2003). A credibly run new currency has operated next door, for decades, launched by a country far poorer than Scotland is now.

The 2014 claims, audited

Here is what was said then. In August 2014, Scottish Labour leader Johann Lamont told an audience in Glasgow that interest rates in an independent Scotland would be 1 to 2 percentage points higher, costing a family with an £80,000 mortgage "an extra £1,600 a year for the privilege of living in Salmond's Scotland" (The Scotsman, 11 August 2014). Treasury ministers ran the same argument, warning that mortgages and loans would "dramatically increase in price" if an independent Scotland mishandled its debt (Press and Journal).

Scotland voted No. Here is what UK mortgage rates then did, all inside the union. On 23 September 2022 a UK Chancellor announced roughly £45 billion of unfunded tax cuts; the markets repriced UK government debt within hours (House of Commons Library). Lenders pulled nearly a thousand mortgage products within days, a record (ITV News). The average two year fix, 3.66% at the start of that September, passed 6% by early October, its highest since 2008 (Mortgage Strategy, citing Moneyfacts). More than 1.4 million households were due to renew fixed deals during 2023, most of them coming off rates below 2%, onto far higher ones (ONS).

Measure that against the warning. Lamont's worst case was 2 percentage points, hypothetically, someday. The mini budget delivered a comparable jump in ten days, no referendum involved. None of this means the union causes mortgage shocks. It means union membership does not prevent them. Rates follow economic management and market credibility, wherever the border sits.

The real risk, stated plainly

We promised straight answers. Transition uncertainty is real: markets do price uncertainty, and the years around independence would be watched closely by the people who set funding costs. A poorly managed transition - a vague currency plan, an unfunded budget, a botched debt negotiation - would cost borrowers, in exactly the way the mini budget cost borrowers. A well managed one, with credible institutions and settled agreements, is what carried Ireland through five decades at parity. The gap between those outcomes is competence and credibility, on both sides of the negotiating table. Neither a Yes vote nor a No vote has ever come with a rate guarantee attached, and anyone claiming otherwise has the last decade to explain.

So what's the real question?

Not whether independence day rewrites your mortgage. It doesn't, and nobody credible says it does.

Interest rates follow economic management and credibility everywhere on earth, so the real question is who manages Scotland's economy, and whether you can remove them when they fail. The mini budget was written by a Prime Minister and Chancellor who faced Scottish voters at no point: chosen by their party's members, sitting for English seats, gone within weeks, the repricing left behind on other people's kitchen tables. After independence, the people managing the economy your mortgage rate depends on would be hired and fired in Scotland. This site won't promise they would always manage it well. It notes that when they didn't, you could sack them.

Take it with you

Facts for sharing - each button copies the line, with its source and a link back to this page.

In August 2014 Scottish Labour's Johann Lamont warned that a Yes vote meant mortgages rising by up to £1,600 a year. Scotland voted No, and in autumn 2022 the average two year fix jumped from 3.66% to over 6% anyway (The Scotsman; Moneyfacts)
The one genuine mortgage shock of recent years was the September 2022 mini budget: nearly 1,000 products pulled in days and rates above 6% for the first time since 2008. No referendum required (House of Commons Library; ITV News)
Ireland ran its own pound pegged one to one with sterling from 1928 to 1979, five decades in which Irish and British interest rates barely diverged (Central Bank of Ireland)
A mortgage is a private contract between borrower and lender. Legal analysis of independence expects existing contracts to carry straight on, as Ireland's did in 1922 (Herbert Smith Freehills)