MORTGAGE lenders have been urged not to withhold deals from crofters in a Scottish Government intervention.

Rural Economy Secretary Fergus Ewing has provided fresh guidance on rules surrounding finance for crofter housing – even though the position has been unchanged for years.

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The move comes after islanders on Skye went to local MSP Kate Forbes after being refused funding by the Royal Bank of Scotland (RBS).

The individuals, who have not been named, were both recipients of Croft House Grants, which are awarded by the Scottish Government for repair and rebuilding work.

The scheme is aimed at upgrading accommodation in rural areas and has been in place since 2005. However, Forbes says her constituents have been unable to get RBS mortgages in case of insolvency – because the bank fears Holyrood’s right to recover grant cash would trump its chances of recovering the home loan.

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Ministers have issued official guidance to lenders on the issue twice before, with the last advice provided five years ago. It states that ministers can only claim the grant money back from those they have loaned it to – not other parties like banks. And, crucially, mortgage lenders rank ahead of ministers as their agreement is on a “real right” against the property, not a “personal right” against an individual.

The legal hierarchy provides protection for lenders and should make it easier for applicants to gain loans.

Nothing has changed since and Ewing has now given fresh assurances to the Scottish Government Rural Payments and Inspections Directorate, which administers the grant scheme, to help it “alleviate the concerns of financial institutions”.

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In a letter to Forbes, he states: “It is unfortunate that certain institutions are no longer persuaded by the 2010 and 2013 letters, regarding the question of ranking, considering the position has not altered in the eight years since. The question of ranking in these circumstances ought not to be a problem for the financial institutions.”

Welcoming the move, Forbes said: “I was really concerned that two of my constituents were unable to secure mortgages because they were receiving Croft House Grant assistance.

“It is highly likely that there are others like them who have been denied a bank mortgage because of a misplaced perception about what happens in the event of insolvency.

“The Croft House Grant scheme is really beneficial for crofters across the Highlands and Islands, and it would be deeply unfortunate if anything undermined that progress.”

An RBS spokesperson said: "Due to difficulties in obtaining sufficient security we do not currently lend on crofts. We would welcome legislative changes which would enable us to do so. We do lend on de-crofted properties in certain circumstances.

"We would be happy to review the cases in Ms Forbes' constituency and we will consider the information provided by Mr Ewing in his letter".