The Mortgage Market Review intended to “hardwire common sense into the mortgage market” but, one year on, has it made any difference to a property transaction? TM Group’s Nick Dyoss investigates…
The change in lending criteria introduced by the Mortgage Market Review (MMR) on 26th April 2014 were, as stated by the FCA, designed to “hardwire common sense into the mortgage market”, and prevent a return to irresponsible lending that took place in the run-up to the credit crisis. Whilst time will tell if the long-term aims of MMR have worked, recent research by TM Group reveals one unintended consequence: namely that aborted or collapsed housing transactions are on the rise.
In April, TM asked conveyancers, “Have you witnessed an increase in the number of transactions that have aborted over the past 12 months?”
86% of respondents had seen no improvement or an increase in the last year and only 14% have recorded a fall. This begs the question of ‘why?’ when MMR was supposed to introduce stability.
February of 2015 saw research published by MoveWithUs which indicated that 49% of collapsed transactions were due to the mortgage falling through whilst 21% were caused by buyers not being able to afford as much as they thought due to MMR. Other issues cited were adverse searches & surveys and sales falling through higher up the chain.
Collapsed transactions are not a new problem.
Pre-MMR, in April 2014, QuickMoveNow highlighted a significant increase in their Sale-Fall-Through-Index with 27% of transactions in March 2014 failing to complete. The most common causes were identified to be on the seller’s side rather than the buyer’s and included gazumping and problems with their own chain.
So what can be done to address this issue? Abortive transaction insurance for residential property is available from as little as £39.00 and will reimburse clients up to £1500 for conveyancing costs, mortgage arrangement fees, lenders fees and survey fees. Cover includes the most common reasons identified above including mortgage lending, gazumping and adverse searches and is also available for sale transactions as well.
Andrew Payne, the National Business Development Manager at Northcott Beaton, commented:
“‘The very nature of today’s property market means that there is heightened uncertainty within any transaction. If buying as an owner occupier, there are also elements of emotion attached to the transaction and, as such, it is imperative that consumers have the opportunity to protect themselves against the pitfalls of abortive transactions. In essence, this could indemnify the client for any financial loss enabling them to commit faster to any future potential purchase.”
Abortive Transaction Insurance from Northcott Beaton and underwritten by DAS is available from TM Group from £39 including IPT and is available for purchase and sale transactions.
For more information please contact your Account Manager. If you’re new to TM Group, call us on 0844 249 9200 or email email@example.com to get started.