Sunday, November 27, 2022

Mortgage deals collapsing in the Christmas shopping season cost homebuyers up to £75,000

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A delay in transfer procedures has left many facing property collapse in the coming months

Delays in property sales due to the Christmas frenzy could cost homebuyers tens of thousands of pounds in higher mortgage rates.

People who had a mortgage offer prior to the mini-budget generally have six months before that offer expires.

Some believe this is in jeopardy due to long delays in legal work. Should those deals expire, that means you’ll have to find a new mortgage at a much higher rate.

Chris Sykes, a broker at Private Finance, said one client’s offer, a first-time buyer, is about to expire. Should that happen, her rate will rise from 2.58 per cent to 5.5 per cent, which will cost her around £75,000 over the next five years.

“Customers are getting desperate and need to rent as transactions take so long,” he said.

James Myatt, Mortgage Broker at Embrace Financial Services added: “I am currently supporting a young family who have been waiting for the construction of their newly built co-owned property for over a year.

“The mortgage offer expires next week and we have to resubmit her application. Currently, the developer expects their house to be ready in February 2023, almost 18 months after my clients placed a bid for the house.

“This delay will mean that their mortgage payments on their new home will increase by around £100-200 a month and they will have to reconsider what percentage of their new home they can afford to buy.

“It has a real and dramatic impact on a young family who just wants to live in their own home.”

If someone borrows £350,000 on a property and sees interest rates rise 3 per cent due to delays, they will pay around £50,000 more in fees over the next five years.

Much of the delay is also due to a slow transmission process due to a lack of attorneys, as well as the fact that attorneys still use faxes in some cases and don’t always work quickly. Delays also ensued as people realized their chain had collapsed and tried to resell.

The month leading up to Christmas is traditionally a busy time for the property market as people look to spend the holiday season in their new homes or close the deal before solicitors and agents take a break.

Mr Sykes added that there are “many” other examples of customers whose offers have expired, with rate hikes resulting in mortgage repayments now falling into the six-figure category and certain individuals being unable to complete the purchase as previously planned.

The delays started when the stamp duty holiday was introduced in July 2020.

The tax cut led to an increase in the number of first-time buyers who rushed to take advantage of the lower cost, which in turn led to a backlog of people wanting to hire a carrier.

There are also sometimes long delays at the land registry, especially when registering a new building for the first time.

Purchases continue, but the delays in registering the title are so significant that they can last over a year or so and therefore ultimately impact those facing re-mortgaging.

Nonetheless, Mr Sykes suggested that delays should hopefully ease off soon as transaction volumes ease off.

“Given the lower demand we’re seeing at the moment, I’m hoping she will clear some of the backlog and get some of the deals through.”

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