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Down valuations, impulsive buyers and estate agent pressure leading to abandoned mortgage applications – analysis

  • 31/05/2022
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Down valuations, impulsive buyers and estate agent pressure leading to abandoned mortgage applications – analysis
Uncertainty, pressure from estate agents and the prospect of rising costs is leading some mortgage borrowers to abandon the application process early, brokers have said.

Andy Lawrence, mortgage and protection adviser at All Financial Advice, said: “People are seeing a bit more reality with the cost of living going up. 

“People are suddenly concerned that they might get stuck when they think about energy prices and everything else.”  

“We’re noticing more people that were pushing themselves to the absolute limit be a bit more cautious now,” he added. 

Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert, said his firm was fortunate that most clients in its pipeline were completing but he was aware of abandoned applications. 

He said some clients were being outbid on properties and subsequently losing out, whereas others put multiple offers in and were withdrawing to proceed with their final choice.  

Lawrence also experienced people testing the waters on purchases and described their attitudes as the “biggest disappointment”. 

He has come across clients who made a high offer but told him they were prepared to pull out of the process if the property was down valued. 

Lawrence added: “I do a ton of work for it to never go anywhere. Fortunately, we haven’t had many people with that kind of viewpoint.” 

To mitigate this, his firm now charges a cancellation fee to clients who cancel an application without a valid reason. Allowances are made for circumstances out of their control, such as a down valuation where the client genuinely intends to proceed. 

Another client of Lawrence’s put in an offer of £560,000 for a home with an asking price of £460,000. This was down valued to £500,000 which Lawrence said still fits, but the client was going back to the estate agent to haggle on the price. 

He warned the client they overpaid and probably would not have “much mileage” but said they could still try. 

Lawrence said a home information pack would reduce this from happening as people would know how much higher their offer was compared to a property’s value and give them a heads up on the possibility of a down valuation. 

Dhoffer has begun to preemptively tell clients to be conservative when considering putting in offers above asking prices, warning that anything 15 or 20 per cent higher could result in a down valuation. 


Estate agent pressure 

Brokers said ever-prevalent pressure from estate agents was also making the situation volatile. 

Howard Reuben, owner of HD Consultants, said they were creating a false sense of urgency and making buyers feel they should make a high offer to secure a property. 

He also said some firms were putting buyers through a pre-offer affordability check with their in-house broker, then instructing solicitors before a mortgage offer with a lender has been agreed. 

Reuben said: “All in all, there is too much desperation to get a quick sale from the estate agents which massively adds extra anxiety to the process and this in turn leads to an explanation of why we are seeing so many deals being withdrawn, and purchases lost.  

“We mortgage advisers are heavily regulated, we work tirelessly to support our clients’ expectations. We’re on the front line with hundreds of clients all the time, whilst the estate agent causes havoc and leaves us to manage the chaos they cause.” 

Lawrence raised concerns around estate agency practices too, adding: “I think the estate agencies are not really helping, because they’re obviously creating this situation.  

“They do all the viewings in two hours to get 15 people in their property at once, so buyers think it’s a shootout between who’s going to get it.” 


Changing minds 

Lawrence said the mood of the housing market during the stamp duty holiday impulsively inspired some people to sell. 

He added: “Somebody sees their next door neighbour put the property up for sale and thinks, ‘wow, we’re going make a million on our property’. They put their home up for sale, sell fairly quickly, and are really proud of that.  

“Then all of a sudden, they get in a situation where they realise that they can’t find a new home because everything else has gone up by so much. They spend two or three months trying to find something, but they’re not particularly motivated to move. So, they threaten to withdraw, and we’re living on tenterhooks.” 

This observation of fickle behaviour mirrors a recent survey from Trussle, which found a tenth of people who moved during the pandemic felt they rushed their decision. 

Jane Simpson, managing director of TBMC, said although most of her business came from remortgaging landlords meaning instances of abandonment were infrequent, cancellations occurred where clients changed their minds about a purchase. 

She said: “We’ve seen several cases where applications have been made on rates just before they were withdrawn, and when the client has been unable to get that first choice product they’ve pulled out.  

“The uncertainty in the market does seem to be leaving some landlords unsure about expanding portfolios and we will perhaps see a slight slow in purchase business until the markets steady.” 

However, she said there was a “big rush of applications in early spring” suggesting landlords were getting ahead of rate rises which may have brought purchase activity forward.  


Evolving circumstances 

Dhoffer said lenders reducing the amount people could borrow due to updated affordability calculators in light of the rising cost of living was also impacting client sentiment. 

He said: “First-time buyers are very hesitant at the moment.”

Dhoffer added: “People are very keen to move but they’ve probably never experienced anything quite like this. Where there are nine or 10 viewings on any one property, and their offer is just one of many.  

“For these guys that are renting as well, rents have gone up, so it’s become a situation where they think, ‘do we sit tight? Do we wait to see where the market goes? Is the market going to crash?’ These are questions that have been thrown our way a lot.” 

Dhoffer added: “From a broker’s perspective, I think we’ve got a duty to bring confidence to any potential buyer. Tell them what’s to be expected in today’s market, to be aware of any pitfalls and just to not give up. There are a lot of people that will go through two or three of these and think, ‘Well, it’s never going to happen. I’m just going to hold off’.” 

Lender backlogs extending the time it takes for a mortgage offer to come in, along with delays in a chain, do not help either as circumstances change in the interim. 

Lawrence said for this reason, some six-month offer periods were not proving to be long enough.  

He managed to get a client a 0.99 per cent rate mortgage in December, but that product has now gone up to 2.5 per cent. While the rate is still relatively low, coupled with increasing living costs, this has created nervousness in his client. 

He said he understood that lenders needed to draw a line when it came to the lifespan of an offer, but said the current environment made the situation “fragile”. 

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