Chain reaction

ended 12. July 2022

A Times journalist is writing a piece along the lines of: “Chain reaction: conveyancing is still taking a long time, mortgage offers are expiring and buyers want to renegotiate prices down in light of the cost of living crisis”. Are you seeing evidence of this and do you have any case studies or anecdotes that reflect this situation? In short, are conveyancing nightmares, rising rates and increasingly cost-conscious buyers creating a difficult market in which to buy or sell?

12 responses from the Newspage community

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Without doubt, the processing times have increased for purchasing a property. This is across the board, conveyancers and mortgage lenders are slower as they have been inundated with increased business. It is tricky for those that are in long chains when their existing offers are due to expire. I have a client that has a mortgage that was offered in March and that is due to expire in September. It is looking increasingly likely that the purchase will not go through by then due to numerous chain delays. We secured a rate at 1.78% for a 5-year fixed, but clearly this rate is not available now and the lowest would be over 3%. This would be a significant increase, especially in this case as the loan is £1.25m, it equates to at least £15,000 more per annum in interest.
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We are seeing evidence of this. Only eight months ago, lenders were prepared to offer extensions to mortgage offers if the conveyancing process was slightly elongated, but this was when rates were stable and low. Now, lenders want their pound of flesh as the rate negotiated at the start of the process will undoubtedly have changed and this has the knock-on effect that an expiring mortgage offer will be potentially extended, but on a different more up-to-date rate. Longer chains are affected most when first-time buyers are simply unable to afford the change in rate, knocking the whole chain into a quandary. I am seeing, in some instances, an increase of in excess of £300 per month more cost to the borrower. Yes, renegotiations are often attempted and more often than not they are accepted by a vendor..... however, those that don't end up staying put and not moving home because they cannot afford such an increase. This will change the dynamic of the property market and will only serve to cool the number of transactions in the coming months.
The main difficulty is the time things are taking is hitting our clients in the pocket, especially where new builds are involved. Most mortgage offers are valid for 6 months, after this point we have to reapply, and with reapplication comes new rates. Some of these clients had reserved their properties and had mortgage agreed with rates sub 2%, now on the reapplications, the rates are 3%+. This, coupled with the time conveyancers are taking, if you are looking to move before the end of the year you needs to get your skates on.
Currently, the time it takes to buy and sell a home is outrageously long. However, the blame isn't all conveyancers' fault. Often, sellers and buyers can be lax in getting the right documents in the right format to the right person, which can cause unnecessary delays and result in false starts. Moreover, solicitors aren't to blame for delays at the Land Registry and with third-party providers for the legal searches required as part of buying when using a mortgage. The confluence of rising rates, the cost of living crisis and mortgage offers expiring are causing additional problems, especially if buyers want to start renegotiating at the eleventh hour, which always causes more problems than it solves, often leading to chains collapsing after months of work. It's time to overhaul the buying and selling process, to redesign them using tech and digital systems to speed things up, create efficiency savings and reduce uncertainty. For example, why can't digital signatures be swapped for wet ink on mortgage and title deeds? Why can't sellers be made to obtain all the required searches for a property before listing it for sale? Why can't sellers, when listing for sale, instruct solicitors on day one of the properties going on the market, so all the contract packs are organised for when a buyer comes along? Those three simple changes to the current process would cut out at least six weeks or more of delay. However, will anyone in the government read this and then lobby for change? That's an entirely different question.
We're yet to see anyone try to renegotiate a price down - don't forget that house prices are indeed still rising. Conveyancing is still in utter disarray though with real staff shortages as good lawyers leave the industry because they've just had enough on top of the usual recruitment challenges. The whole process needs stripping back and rebuilding from scratch using modern technology and processes. If it's more efficient, the staffing point is less of a concern and everyone is happy.
The effect of a delay in the conveyancing process up until recently was, for many, a minor annoyance and part and parcel of what 'sometimes happens' when buying or selling a property in England and Wales. In a static, low rate environment, the effect of a mortgage offer expiring did not bring catastrophic consequences with new rates being often comparable to the original mortgage product. However, with mortgage offers generally being valid for 6 months we are starting to see the real world problems of not completing the purchase within this time frame. Six months ago, the rates at the best loan to values were hovering at about 1.25% whereas now you would be looking at over 3% for the same period. Some may argue that rates were never going to remain low, which is correct, but it is still a hard pill to swallow for the purchaser that has moved heaven and earth to try and get the deal over the line, only to be let down by another party in the chain.
Broken Britain is certainly impacting the property market with significant delays hitting lenders and solicitors in particular. Big banks are facing similar problems to other major companies such as airlines in struggling to recruit replacement staff for those laid off in the pandemic. Working from home seems less efficient for larger organisations than having staff in offices. Solicitors sit in the middle, dealing with mortgage lenders, local authorities and other organisations who are struggling to keep pace in the post-pandemic world.
Despite conveyancing delays, mortgage rate rises and cost-conscious buyers, demand for new build property continues to rise. As the current housing stock ages like a cheap off licence wine, new build property offers climate conscious buyers the opportunity to buy a property that is stuffed full of product guarantees and warranties which guarantee low ongoing maintenance costs. Old, cold homes with “character” are no longer the platinum option for buyers that want low cost, energy efficient properties for them and their families to call home without worrying about potential savings splitting costs for replacing the roof or central heating system. Perhaps this is the seismic change we have been expecting in the property market that shifts the paradigm from old, cold and unsold to new, green and bold.
This problem is basically being driven by multiple parties, including lenders, brokers, estate agents, conveyancers and the end clients. One bit of missed info or a slight delay to upload a document can cause no end of issues. I have one case currently where the client was slow in returning one document. The lender now has a very slow response time and it took nearly three weeks to review that document. And now the valuation is booked for four weeks' time. By the time the lender gets this and deals with it, the current mortgage offer that they have paid for in advance, will be at risk. The new interest rate for the same mortgage is currently 0.75% higher and that may increase before we get it agreed.
Pre-pandemic I would have needed to extend maybe one in twenty mortgage offers but now I would say it is one in five, as so many people are falling victim to a chain breaking down or lenders and conveyancers causing delays. Buyers have been panicked into making quick decisions on properties due to the ferocious market and some are getting cold feet once the dust settles. I think we are starting to see a power shift from sellers to buyers as the growing number of economic factors are making it less appealing to buy property and competition is returning back to a more reasonable level.
It's not just conveyancing delays causing problems. One of our clients, who we got a mortgage offer for in March, still has no idea when she'll be able to move into her new home. It's a probate sale, and there's a massive backlog of cases at the Courts and Tribunals service.
Speed of transaction has always provided buyer and seller with thinking time, often far too much in my opinion! Now with added dimensions to consider over the biggest purchase of one’s life, I don’t think buyers can expect sellers to be the makeweight. Buyers leveraging the cost of living crisis for renegotiation doesn’t sound like something my clients would go for. It hasn’t happened yet, but I suppose there will be a first. Sellers are still sitting fairly pretty knowing there are other buyers waiting to pounce if given the opportunity. This of course may start to change.