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“In my fourth decade of selling property I have never seen anything like the turmoil that the mortgage market review is causing.”
Introduced in April following directives from the Financial Services Authority, potential buyers don’t so much have to go through a home loan interview as an interrogation of their finances. Euphemistically built around a lifestyle questionnaire the potential borrower has to answer questions about every aspect of expenditure, from loans, memberships, social spending and pets.
A buyer then has to produce 6 months bank statements. If they don’t correlate with the questionnaire and there are significant omissions, you risk being declined your mortgage and having a credit footprint against your name. Once they’ve calculated your net income, the lender will inflate the mortgage rate by up to 3% to cover potential increases in interest rates and future affordability.
Under the new system there is a shortage of personnel qualified to carry out the ‘interview’. As a result there are huge processing delays. It can take up to two months to get your appointment to see an advisor. Once you’re approved and find a property there is a backlog that can cause further delays. So a completion that would have taken a couple of months, can take four.
At no surprise estate agents are prioritising purchasers that already have a decision in principle. Make sure you take this important step before attempting to buy.
Many people with solid careers are finding that the new system is reducing what they could borrow. Equally some buyers who would’ve been approved are now finding they can’t get a mortgage. Significantly the latest mortgage figures show the mortgage approvals in June were the lowest for a year. That is because the processing side is causing some serious delays.
Is there anything that can be done to speed things up? Well, independent mortgage brokers have a great deal to offer here because they tend to be more accessible. Working longer hours and knowing which lender is proving more efficient can therefore speed things up.
It’s significant that the Bank of England who were poised to increase interest rates have held off so far. They have statistics that show a slowdown of property sales. The government want a robust property market to further their ambitions for next year’s general election. In the meantime the system is creaking and further revisions must be made to help efficiency. Otherwise, potentially thousands of buyers could lose out.