Senior lawyers, bankers and UK Government officials are thrashing out a deal to save Scotland's bridging loans after they were effectively abolished in new Westminster legislation to come into force tomorrow.
Senior legal experts yesterday said they believed they had found a way to keep the credits - an essential lubricant to the increasingly fragile Scottish housing market - but only by wrapping them in red tape.
The Law Society of Scotland last month realised that Scottish bridging loans, which are designed to tide over house buyers who have bought a new home but not yet sold their old one, would fall foul of the UK Consumer Credit Act 2006.
The body, which represents the nation's solicitors, including conveyancers, launched urgent talks with authorities, telling the UK Government that the new laws would make "short-term financing difficult, if not impossible, in Scotland".
Last night, the Westminster Department of Business, Enterprise and Regulatory Reform or BERR said talks were succeeding. A spokesman said: "We have spoken with the Law Society for Scotland and industry and are confident that this is being resolved."
Politicians, however, were last night asking how a major piece of UK legislation - the widely welcomed 2006 act was first of its kind since the days when credit cards were carried only by American tourists - could have failed to take full account of Scots law.
The twist for consumers emerged as Gordon Brown warned that the global economy faces an unprecedented financial crisis, during a speech in London.
He called for changes to global financial institutions on the same scale as those that followed the Second World War.
Meanwhile, Scottish home buyers were yesterday already facing the tightest mortgage market for years with the nation's biggest home loan bank, Halifax Bank of Scotland, announcing new pricing bands that squeezed customers with low deposits.
HBOS said the new pricing will raise the minimum deposit required to 5% from 3%, but will offer cheaper rates for more "prudent" customers with a deposit of over 25%.
The bank group declined to say how much rates will rise, but a spokesman said: "There is some pricing upwards but it's very much in line with the market."
Rival banks and building societies across the UK were last week withdrawing 100% mortgages as Britain's credit crunch continued - promising difficult months ahead for the house market. Market experts last night said bridging loans could be particularly important when the market was slack.
The SNP last night pinned the blame for the problem firmly with the Scotland Office, which referred questions to BERR.
Mike Weir MP, the party's spokesman on trade and industry, said it was "alarming that bridging loans could have become illegal in Scotland if it hadn't been for the vigilance of the Law Society of Scotland".
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