Across the board, we are likely to see mortgages issued on a much more cautious basis by lenders. This is not necessarily a bad thing but may impact on the property market as a whole.
It is first time buyers who have, until recently, benefitted from schemes such as Help to Buy, that are likely to be most affected by the changes. More stringent rules will require mortgage applicants to outline ‘basic living costs’ – which will inevitably be higher for these buyers, who will be looking to buy furniture, for example, for their new home.
Due to an increased probability that mortgage applications will decline or the approval process will be elongated, it is also likely that the changes will cause delays to the home-buying process in general as vendors will be less inclined to accept an offer until they have proof that the buyer’s mortgage has been approved.
This may mean we see an increase in the number of transactions falling through at initial stages – although in the long term the risk of offers being withdrawn should hopefully decrease with in-depth assessments being carried out from the outset.
For existing offers, conveyancers will need to be alive to the prospect that offers may get withdrawn between exchange and completion if there has been a material change, as the new rules are used to re-assess the applicant. This may mean that more conveyancers choose to exchange and complete on the same day in order to avoid the risk of this happening.
Where a reassessment is taking place due to a material change, considerable delays could be incurred whilst the lender collates the affordability information. If the client is under contract this could result in completion dates being missed.