Why Scottish Yes vote could push up mortgages and create negative equity

Mr Boulger said: "Most Scots would end up with a mortgage on a Scottish property in a foreign currency.

"These are amongst the riskiest mortgage products available because of the impact that currency fluctuations can have on borrowers' equity and their ability to carry on meeting the repayments."

Currency fluctuations can swing either way, so it is possible that the Scottish currency could strengthen relative to the pound, putting Scottish borrowers in a favourable position.

However borrowers would also be at the mercy of the Bank of England’s Bank rate. A rise in interest rates could push the cost of their repayments up even further. Hundreds of thousands of borrowers could struggle to meet their repayments.

The City regulator, the Financial Conduct Authority (FCA), declined to comment on what would be done to help Scottish borrowers if they ended up with a foreign currency mortgage. It is likely that Scotland would need to set up its own regulatory system to oversee financial institutions and products.

Most British banks currently lend to Scottish buyers but many are expected to pull out of the Scottish market if it becomes independent.

Mr Boulger said most lenders would have no interest in issuing foreign currency mortgages, just as they “don’t lend to other overseas borrowers in France or Spain”.

“So for Scottish borrowers the choice of lenders will be far fewer and their options will become more expensive as a result,” he said.

The Council of Mortgage Lenders, a trade body that represents all the major UK banks, declined to comment on which lenders are likely to carry on operating in Scotland.

There are also fears that house prices could fall significantly in Scotland, particularly in Edinburgh, where many of the UK’s large financial institutions such as Lloyds Banking Group, Royal Bank of Scotland and Standard Life are based.

If these companies relocated staff south of the border, which would be likely, there could be a flood of properties coming onto the market and fewer buyers, dragging prices down.

David Hollingworth, of broker London and Country, said whenever there is significant change in the labour market, there will be knock-on effects for house prices. “Fewer workers means fewer buyers, which will impact on what people are prepared to pay for a property,” he said.

Already, there are reports of savvy buyers in Edinburgh insisting on a clause in their mortgage contract stating they will only pay the agreed price if Scotland votes against independence.

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