Over one in three house sales or purchases collapse because buyers or sellers cannot arrange a mortgage in time, according to new research carried out by the Nottingham Building Society (The Nottingham).
It’s an issue that is more likely to impact on property sellers rather than buyers, with those looking to sell their home twice as likely to see transactions fall through because of mortgage problems or hold-ups.
What’s more, one in six sellers who have seen deals collapse have suffered more than one sale falling through, while 11% of buyers have seen more than one purchase go pear-shaped.
It wasn’t just mortgage problems that caused issues with house sales. Some 25% of sellers had issues with chains breaking down, while issues with surveys impacted 17% of those who had seen their house sale fall through.
Arranging a mortgage isn’t something that can be done instantaneously or in double-quick time. As we pointed out in a previous blog, there are many different types of mortgages – ranging from tracker and fixed-rate, to first-time buyer and SVR – and a wide range of competitive deals available to borrowers.
This means that time will need to be set aside to consider options, compare deals, sort through finances and budgeting and work out what mortgage is best for each individual buyer. This is not an easy or quick process, and those who are unprepared could be caught out if they expect a quick fix.
Borrowers are advised to seek expert assistance – from the mortgage branch of a high-street lender or an Independent Financial Adviser – before deciding on the deal for them.
They should also secure an agreement in principle before starting out on the process of buying a home. An agreement in principle is a certificate or statement from a lender to say that they would lend a certain amount – ‘in principle’ - to a particular prospective borrower on the basis of some basic information.
With mortgage rates lower than ever – the Bank of England recently cut interest rates to historic lows of 0.25% to stimulate the economy post-Brexit – people are obviously keen to buy and sell homes, but both buyers and sellers must remember that arranging finance for a mortgage takes time and isn’t something that can be rushed through at the last minute.
Advanced planning is needed to ensure that the chances of a sale collapsing are kept to a minimum. A survey pointing out a structural defect isn’t something you can do a great deal about, but there are other ways in which buyers and sellers can improve the prospects of a smooth, hassle-free sale.
Many people will start looking for a home first and worry about securing a mortgage later. This could cause complications and delays at a later date.
A lack of finance for buyers, however, was not the only thing disrupting the hopes of would-be sellers – 32% of those surveyed said their plans were derailed because of a last minute change of heart by buyers.
Unfortunately, second thoughts or cold feet regarding a property can be quite common, but as a seller you just have to hope that you get buyers on side who are fully committed to the house sale.
The research, which was conducted online between 25th and 30th August 2016, spoke to 1,009 adults aged 18 and above.
Despite the fact that some sales collapse or fall through, many more sail through to completion. The number of housing transactions completed in the year to 5 April 2016 was up to 1.328 million, up from 1.2 million the previous year.
This rise can be partly explained by the late rush from investors to beat the introduction of the new stamp duty rules in April. Once this deadline passed – and the new legislation came into play – there was a significant slump in the number of housing transactions in April compared to March, down to just 73,430 for the month.
By July, however, it had picked up again, according to figures from HMRC. A total of 104,200 residential property transactions were completed in July as the market recovered from the stamp duty deadline and the pre-referendum slowdown.