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Borrowers at risk of losing mortgage offers as delays plague industry

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  • 20/10/2022
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Borrowers at risk of losing mortgage offers as delays plague industry
Many borrowers are at risk of losing mortgage offers secured prior to a steep increase in rates, as delays take their toll across the industry, brokers say.

 

Rising interest rates and the fallout from the mini Budget have seen mortgage rates rocket to an average 6.52 per cent for a two-year fix, from 2.34 per cent less than a year ago in December 2021.

Over the same time, five-year fixes have gone from 2.64 per cent to 6.36 per cent, according to Moneyfacts.

Brokers say would-be borrowers are now facing eye-watering increases to their rates if they lose offers secured just a few months ago.

Down valuations, conveyancing delays and complex property chains are among the issues threatening to derail transactions.

Knowledge Bank chief executive Nicola Firth said she understands completions are now typically taking more than 20 weeks.

Conveyancing delays have been hitting the industry for months, but inundated lenders are also beset by increased processing times amid a huge increase in activity.

 

Lenders leaning more towards cashback than free legals

Lenders now appear to be trying to steer borrowers away from free legals, which often have some of the slowest turnarounds.

Chris Sykes, technical director at Private Finance, said: “We’ve noticed more cashback options rather than free legal options lately…

“This could just be due to lenders not necessarily needing to give incentives to encourage business considering the recent high demand, but it could also be due to the stress of free legals for many.

“There are some free legal solicitors who may either take weeks to send out legal packs, their systems may not work properly for clients, they do not include a phone number on their website to call or they do not speak to brokers due to business volumes, among other things.”

 

Steep increases on cards as legal delays delay process

Imran Hussain, director of Harmony Financial Services, said: “I currently have a client in the process of purchasing a property whose mortgage offer is likely to expire prior to completion, and if this does happen, any new product will have a rate of over five per cent instead of the two per cent the client currently has.

“This will cost the client an additional £15,000 over the next few years, and this is solely down to vendors not finding a property quick enough or simply unwilling to consider moving into to rented accommodation.”

Joe Stallard, director and adviser at House and Holiday Home Mortgages, added: “We’ve a number of clients contacting us trying to see if they can get an extension to their mortgage offer. Some chains seem to be moving incredibly slowly through the legal stages right now and clients are rightly worried that they’ll lose a rate they secured months ago.

“This can mean a lender reassessment, which in many cases means a steep increase in the rate and monthly payment when comparing mortgage products of a few months ago to now.”

 

Lenders happy to offer extensions… for now

Lender offers typically last between three and six months. In cases where there are delays, the broker can ask for an extension.

There are some fears that lender could be less willing to offer extensions in the current climate, but advisers say they are still managing to secure this crucial extra time.

Mark Robinson, managing director at Albion Forest Mortgages, said: “I had genuine concern whilst submitting a request with a lender to extend a current mortgage offer last week.

“The rate was 2.72 per cent, which compared to today’s 5.8 per cent plus rates is obviously amazing. However, I was pleasantly surprised they approved the extension.

“While there is a concern that extensions may prove difficult with some lenders, I imagine the majority will continue to operate as they always have and honour extensions in the same way.”

Graham Cox director at Self Employed Mortgage Hub, added: “Most lenders won’t want to see deals fall through – so where they can afford to extend, I’m sure they will.”

In cases where the mortgage offer does expire, it’s more or less back to the drawing board for the broker and their client.

Advisers then face doing hours of extra work sourcing a new deal for a client.

In effect, brokers could end up doing their job twice only to be paid once or broach an awkward conversation with the client about paying an additional fee.

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