Home Buyers Who Need Quick Loans ‘Losing In Mortgage War’ As Lenders Slow Down In Processing
Homebuyers who need a quick mortgage are increasingly seeing their purchases scuttled by lenders who take too long to process applications.
The government’s loan finance program, giving banks and building societies £ 80 billion to lend to borrowers at low rates, has sparked a wave of cheap offers.
These include an HSBC two-year fix to 1.79 percent and a Norwich & Peterborough Building Society five-year fix to 2.74 percent.
Held: London & Country says it is currently seeing more complaints about delays at Virgin Money and Leeds BS
But the rush to take advantage of these offers has seen lenders struggle to cope with a sudden influx of customers. According to broker Coreco, the time between applying for and receiving a mortgage can now be up to 20 business days on average.
While some lenders do it in 13 days, the slowest can take up to 33 days, or more than six business weeks. This means that buyers whose purchase of a home depends on quick approval of a deal lose out.
Many home sales rely on a party’s ability to obtain financing before a set completion date; when mortgage delays delay the transaction, exasperated sellers regularly pull out.
David Hollingworth, London & Country Broker, said: “The delays are especially frustrating if you have all the paperwork ready for the bank and they keep coming back asking for something else.
“The back and forth drives people crazy, especially when banks claim they haven’t received documents sent by email.”
In many cases, it takes weeks – instead of days – just to get an offer on the table, let alone the funds in place.
Brokers are warning buyers to wait three to four weeks for lenders to review their mortgage application and make an offer.
Still, an application should be processed within a week or two as long as all the information they need is submitted in advance.
Ray Boulger of broker John Charcol says, “Lenders should aim for seven days. They can do their verifications in 24 hours, the estimate in three days, and then they have a day or two to make the offer. ‘
Many of the banks with the largest backlogs on mortgage applications offer the best rates. This could mean that buyers who need a quick loan turn to a lender that offers a less competitive rate but more able to process the offer quickly.
Mr. Hollingworth adds, “The key is to balance service, speed and price. So even though Halifax, for example, is fast, its fares aren’t that strict, so it might not be that busy.
London & Country says it is currently seeing more complaints about delays at Virgin Money and Leeds Building Society.
“But that depends on the deals the lenders make – the ones that are the fastest now may not have the same names as three months ago.” Plus, while smaller lenders may be slower, they often have more flexibility, which means they can prioritize urgent requests more easily.
It’s not just buyers who suffer from delays.
If you’re renewing your mortgage and your application is delayed, you may have to stay on your current lender’s rate longer than you expect, which can mean you pay more if you have a more expensive offer.
Also, keep in mind that most lenders now have more stringent credit checks in place. Until 2007, loan applications were often accelerated within days, even for those who only had a 10pc deposit.
Now, even if you have a great credit score, there are very few instances where banks will expedite a mortgage application. Banks will ask to see documents proving your income and expenses – usually three months of statements.
If you are a salaried employee, it should be simple.
However, if you have income from many different sources or are self-employed, this process can be much more complicated and time consuming.
And if you delay sending the documents your bank needs to see, you will inevitably experience a delay.
Likewise, if you have a complicated case – if you live abroad for example – you should expect things to take longer.
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