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Average Mortgage Application Takes Two months with Strict New Rules

Mortgage applications are now taking up to two months to be approved as banks and other lenders examine the bank statements and bills of applicants. This extended timeline follows the introduction of strict new lending rules.

In April 2014 legislation was introduced that requires banks and building societies to perform deep and comprehensive checks on the spending habits of all applicants before approving them for a home loan.

This measure is intended to confirm that lenders do not loan too much money to people who could potentially have trouble meeting their repayment obligations in the future.

Now estate agents are warning that mortgage applications are routinely taking 50 days and up to be processed due to the heavier amount of administration involved.

Pursuant to the Mortgage Market Review (MMR), mortgage applicants face personal and probing questions that range in scope from how often they provide gifts to their spouse / partner to whether they intend to start a family in the near future.

Each individual lender selects their questions, which are designed to determine how much money the applicants spend each month and whether they can actually afford the amount that they are seeking to borrow.

Estate agents say that this new procedure has dramatically lengthened the amount of time it takes to purchase a home. In general, the process takes around two weeks longer than it did previously.

The National Association of Estate Agents said that the MMR is causing the mortgage application process to run more slowly, and evidence suggests that more than 50 days can transpire between application to mortgage offer.

This delays sales and results in uncertainty – which also brings a greater risk in the sale falling through.

 

Specialists in Construction Insurance

Overall there is a feeling that the market is being stifled by mortgage delays. Many mortgage brokers are saying that homebuyers are becoming frustrated with all the paperwork involved in providing up to 3 months of bank statements.

The new rues also delay applicants from submitting their application because the increased amount of documentation that they are now required to provide. The lender then has to take time checking the statements for any extra and undeclared spending, such as regular payments or direct debits. Application approval times have improved slightly in recent days, but delays are still being experienced.

One such example is an application made earlier this year which was delayed because the bank learned that the client had bought his wife an expensive anniversary gift. The lender was concerned that gifts of this type might be a routine practice, so they factored it into his monthly spending. The client disputed this conclusion, which was eventually overturned.

The MMR is making it more labour-intensive to get all the documentation in order, so that the mortgage application goes through quickly and smoothly, with no queries that result in delays.

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