‘A 16-week mortgage delay could cost me lb10,000’ – stamp duty holiday rush hitting homemovers and remortgagers
People moving home are facing waits as high as four months for mortgage applications to undergo, with delays potentially scuppering house moves and costing thousands of pounds at the begining of repayment charges.
Which? has received reports of people moving home and remortgaging facing significant waits, as lenders struggle with a rise in demand fueled through the stamp duty cut.
Here, we explain why lenders are taking longer than usual to process mortgages, and offer advice on what you can do to reduce the likelihood of a delay.
Stamp duty rush causes log-jam
The stamp duty holiday has led to house prices soaring by a lot more than 10% year on year, as buyers rush to get their transactions within the line to benefit from tax savings of up to lb15,000.
The rush has taken about major delays within the home-moving process, with mortgage brokers and conveyancers struggling to maintain demand. The property portal Rightmove says a lot more than 700,000 people are in the process of moving home, inducing the biggest log-jam observed in ten years.
Mortgage delays are bad news for homebuyers and homeowners seeking to remortgage. In the most serious scenarios, delays in approving home loans can result in chains collapsing, or homeowners not having enough time when remortgaging and being moved on for their lender's standard variable rate (SVR).
'A 16-week mortgage delay might cost me thousands at the begining of repayment charges’
Chris de Kock recently decided to move house to take advantage of the stamp duty holiday.
After through an offer accepted on a property, he contacted his lender to request to transfer his mortgage towards the new home (a procedure called porting). As Chris’s mortgage was still being in its fixed term, he would happen to be required to pay an early repayment charge (ERC) of nearly lb10,000 if he took out a mortgage having a different lender.
Time was of the essence, as Chris’s buyer was also wanting to complete before the end from the stamp duty holiday.
Chris’s mortgage was with Platform, part of the Co-Operative Bank. He says: 'When we contacted Platform, i was only offered a callback in up to 10 business days. Once they did call us back, we were informed it would take 16 weeks for the mortgage application in the future through.'
Unprecedented demand
Chris was concerned that this type of long wait could leave his house sale at risk of falling through, however when he complained to Platform he was told nothing could be done.
To save Chris’s chain, his broker secured a home loan with another lender. Unfortunately, this means Chris now faces paying the lb10,000 early repayment charge to Platform. He's lodged a complaint against Platform towards the Financial Ombudsman.
A Platform spokesperson told Which?: ‘Typically, mortgage porting timescales are quoted to be with Thirty days to three months over the industry. However, we view an unprecedented demand from your customers to request a mortgage port and we estimate that our mortgage porting timescale happens to be around 16 weeks.
‘Whenever we spoke to the customer, we were transparent and informed them from the potential timeframe so that they were able to make an educated decision by what they desired to use their mortgage. We appreciate this was disappointing for that customer.'
Are long processing times allowed?
16 weeks may appear like an incredibly very long time to hold back for any mortgage to become switched to a different property, but legally there's no set timeframe by which lenders must process mortgage applications.
Chris’s case isn't only example we've heard about long mortgage processing times causing issues. Another homeowner recently contacted Which? after a 12-week delay when remortgaging pushed them onto their lender's SVR, increasing their monthly repayments.
We contacted UK Finance, the trade body for mortgage brokers, to inquire about if such delays are thought reasonable.
It told us: 'Mortgage providers still face significant amounts of demand in front of the end of the stamp duty holiday, whilst also dealing sensitively with borrowers who're approaching no more their mortgage payment deferral arrangements. The is working hard to maintain the high levels of service customers require during this period of unprecedented demand in the housing market.’
How to prevent delays when trying to get a mortgage
We spoke to 2 lenders to discover what homebuyers and remortgagers can perform to prevent delays within their applications.
Will Rhind, head of mortgage advice at Habito, says: 'If speed is important to you when obtaining a mortgage, be sure you use a broker and explain your timeframes. At the moment, we have a tendency to advise customers who are in a rush to prevent lenders that we understand are taking many years. If being qualified faster is much more important than getting the lowest rate available on the market, customers can get that information and weigh their options up.’
Which borrowers are worst affected?
David Hollingworth of L&C Mortgages agrees that some lenders are reporting longer processing times, but says borrowers with complicated applications are likely to be worst impacted by delays.
He told Which?: 'Lenders may need to see more evidence in which the applicant's income is more complicated, and can need to ensure the lending is sustainable in the present climate. For instance, lenders are having to look at records and current income levels for self-employed borrowers'.
David says people with more straightforward applications – for example people remortgaging – should think about preparing in advance to have a deal.
He says: 'Remortgages in many cases are a less complicated transaction with fewer blockages, and thus times can be quicker. Starting to look around three or four months prior to the end of the current deal is unquestionably possible, given most mortgage offers will typically be valid for three to six months.’
What to do if a delay costs you money
If you think you've lost money because of excessive processing times, you can submit a proper complaint.
Will Rhind says: 'If a person believes an earlier repayment charge (ERC) continues to be unfairly applied or perhaps is excessive, they should first make a complaint towards the lender. If they then disagree with the outcome, they are able to contact the Financial Ombudsman Service (FOS).
‘Based on all the details of the situation, if the FOS agrees that the ERC has been unfairly applied, they are able to ask lenders to refund the charge, and pay compensation for additional costs, for instance where the customer has had to borrow more income.'
