PRESS RELEASE

This Bank of Scotland First-Time Buyer Review tracks housing affordability in over 286 local authority districts (including 30 London boroughs) across the UK, covering 28 in Scotland. A local authority district (LAD) is classified as affordable if the average house price for an FTB is lower than the price someone on average earnings in the area can pay based on the historical average house price to income ratio of 4.0 (see Editors' Notes for details). The calculation is based on a single income and is, therefore, conservative. The review is based on data from the Bank of Scotland's own extensive housing statistics database, along with data from the Council of Mortgage Lenders, the Office for National Statistics and the Department for Communities and Local Government.

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HIGHEST NUMBER OF AFFORDABLE TOWNS FOR FIRST-TIME BUYERS SINCE 2005

The proportion of Scottish towns and cities that are affordable for first-time buyers has risen to its highest level since 2005, according to the latest Bank of Scotland First-Time Buyer Review. The average house price paid by a first-time buyer (FTB) in June 2012 was affordable for someone on average earnings in 93% of all local authority districts (LADs); the highest proportion for seven years. This is up from 75% a year ago and more than double the proportion of affordable LADs at the peak of the housing market in 2007 when only 43% of LADs were affordable. Number of first-time buyers increases in 2012 The number of FTBs has risen over the past year, albeit from a historically low level, helped by the improvement in affordability. Bank of Scotland estimates that there were approximately 9,000 FTBs in Scotland in the first half of 2012. This is just over a fifth (21%) higher than in the same period in 2011 (7,700), but less than half the number a decade ago (20,900 in 2002). The recent ending of the stamp duty holiday is likely to have boosted the number of first-time buyers in the first six months of 2012 as some buyers brought forward their purchases to meet the March deadline. Scotland is the third most affordable UK location for FTBs The proportion of affordable Scottish LADs (93%) is the third highest among the twelve UK regions and is also close to double the UK average (54%). The North East of England is the only UK region where all LADs are affordable for FTBs. The North West of England has the second highest proportion of LADs (97%), followed by Scotland (93%). In contrast, London is the only region with no affordable areas for FTBs on average earnings. South Ayrshire is the most affordable location for a FTB Across the UK, four of the five most affordable LADs for a FTB are in Scotland. South Ayrshire is the most affordable LAD both in Scotland and the UK with an average property price that is 2.47 gross average annual earnings. Stirling is the second most affordable LAD in Scotland (2.64) while Aberdeenshire is the least affordable Scottish LAD (4.31). Nitesh Patel, housing economist at Bank of Scotland, commented: "With first-time buyers forming a vital part of the Scottish housing market, it is clearly encouraging that the number of those getting onto the property ladder for the first time may well increase this year, albeit from a historically low level. This partly reflects the substantial improvement in home affordability for first-time buyers since 2007, following the fall in house prices over the period." "However, the continued uncertainty over the outlook for the Scottish economy and the difficulties faced by many in raising the necessary deposit remain significant hurdles for those wishing to buy their first home.
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ADDITIONAL FINDINGS Marginal fall in average FTB deposit over the past year The average deposit in the first half of 2012 was marginally (1%) lower than in the same period in 2011. The average FTB deposit of 19,579 in June was, however, still nearly three times higher than in 2002 (7,136). Across the UK, FTBs in London put down the largest deposit (59,221), followed by the South East (34,843). In contrast, FTBs in Northern Ireland put down the smallest deposit (16,267). Over a fifth more FTBs now pay stamp duty In Scotland 22% more FTBs are required to pay stamp duty as a result of the end of the temporary increase in the stamp duty threshold for FTBs - from 125,000 to 250,000 at the end of March. In total, 23% of FTBs will now pay stamp duty compared to only 1% during the period of the temporary threshold increase.

For further information, contact:

Name: Zoe Redhead, Bank of Scotland Press Office Tel: 0131 655 5405 Email: ZoeRedhead@bankofscotland.co.uk

EDITORS' NOTES: THE AFFORDABILITY CALCULATION: A local authority (LAD) is classified as affordable if the average house price for a First-time Buyer (FTB) in the LAD is lower than someone on average earnings in the area can pay. Gross average annual earnings for the LAD are multiplied by 4.0 to calculate the amount that someone on average earnings could 'afford' to pay. For example, if average earnings in the LAD are 30,000, someone on average earnings in the area could pay up to 120,000. The LAD is deemed to be affordable if the average price paid by a FTB in the LAD is less than 120,000 and unaffordable if it is higher. The multiple of 4.0 is in line with the average house price to income ratio for a FTB over the past 20 years (1991-2011). (Source: Bank of Scotland).

DATA SOURCES: This research is based on data from the Bank of Scotland's own extensive housing statistics database and ONS data on average earnings. 1. House Prices The prices used in this research are simple arithmetic ('crude') averages. These prices are not standardised and therefore can be affected by changes in the sample from period to period.

2. Average Earnings Average earnings figures are from the ONS's "Annual Survey of Hours and Earnings" (ASHE) and refer to the means for full-time employees. At local authority level, figures for the relevant local authority (residence based) are used in the majority of cases. Where this has not been possible due to data unavailability, the relevant regional average has been used.

Table 1: % of affordable LADs for First-Time Buyers, 2002-2012*

2002 2007 2011 2012

Affordable

Unaffordable %

Affordable

Unaffordable %

Affordable

Unaffordable %

Affordable

Unaffordable %

North East North West Scotland East Midlands Yorkshire and The Humber Wales West Midlands East of England South East South West London

100% 100% 100% 100% 94% 100% 95% 53% 11% 29% 0%

0% 0% 0% 0% 6% 0% 5% 47% 89% 71% 100%

0% 6% 43% 22% 0% 0% 0% 0% 0% 0% 0%

100% 94% 57% 78% 100% 100% 100% 100% 100% 100% 100% 93%

92% 82% 75% 67% 76% 75% 27% 6% 4% 6% 0% 40%

8% 18% 25% 33% 24% 25% 73% 94% 96% 94% 100% 60%

100% 97% 93% 85% 82% 81% 73% 21% 15% 6% 0% 54%

0% 3% 7% 15% 18% 19% 27% 79% 85% 94% 100% 46%

United Kingdom 64% 36% 7% Source: Bank of Scotland Northern Ireland has been excluded from the regional analysis *12 months to June.

Table 2: Number of First-Time buyers Scotland

Number of First Time Buyers 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1*
Source: CML *Bank of Scotland estimate

Annual % change

20,900 21,100 15,600 15,800 18,500 17,400 12,800 7,000 8,800 7,700 9,333 1% -26% 1% 17% -6% -26% -45% 26% -13% 21%

Table 3: 10 most affordable LADs in Scotland for First-Time Buyers, 2012

Local Authority District South Ayrshire Stirling Renfrewshire Inverclyde East Ayrshire Clackmannanshire North Ayrshire North Lanarkshire South Lanarkshire Fife
Source: Bank of Scotland

Price to Earnings ratio 2.47 2.64 2.66 2.73 2.85 2.88 2.89 2.90 2.90 2.93

Table 4: First-Time Buyer Average Deposit, 2011-2012

Average Deposit (s) 2011 East Midlands Wales North Greater London Yorkshire and Humberside Scotland East Anglia West Midlands South East North West South West Northern Ireland UK
Source: Bank of Scotland

Average Deposit (s) 2012 20,840 19,062 16,753 59,221 19,573 19,579 25,922 22,877 34,843 18,754 30,080 16,267 27,857

1 year % change 4.9% 4.2% 3.9% 2.7% 1.3% -0.6% -1.6% -1.8% -4.4% -7.4% -10.0% -15.6% -0.8%

19,871 18,300 16,123 57,653 19,317 19,703 26,332 23,289 36,464 20,246 33,426 19,266 28,075

Table 5: Stamp Duty - First-Time Buyer Purchases by Stamp Duty Thresholds by Region, 2012 Jan-Jun
% of Properties by Stamp Duty Thresholds <125k Northern Ireland North Wales Yorkshire and Humberside North West Scotland East Midlands West Midlands East Anglia South West South East Greater London United Kingdom
Source: Bank of Scotland

<250k 100% 99% 99% 99% 99% 99% 99% 99% 97% 97% 92% 69% 94%

125k-250k 14% 17% 18% 19% 21% 22% 25% 29% 47% 61% 69% 65% 38%

>250k 0% 1% 1% 1% 1% 1% 1% 1% 3% 3% 8% 31% 6%

86% 82% 81% 80% 78% 77% 74% 70% 50% 36% 23% 4% 56%

"This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report for an individual's own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance." Bank of Scotland plc all rights reserved 2012