Mortgage Drought: Is there a solution?
- AuthorPaul Hajek
Who knew that water levels and drought warnings would lag behind mortgage levels?
Mortgage applications are on the rise but the high deposit barrier ensures mortgage drought conditions exist over much of the country.
Figures released by the Mortgage Advice Bureau show that the size of the average deposit is up by 12.7% since March 2011.
Mortgage rationing has clearly been a factor in the housing market since September 2008
Estate Agents use the term pipeline to describe agreed sales, which have not yet exchanged and completed. So Sellers may well be experiencing a pipeline ban as well as a hosepipe ban.
A metaphorical downpour of mortgage finance would be the obvious solution, but that in itself may amount to no more than a "pipe dream"
The Good Old Days?
Mortgage rationing is not a new phenomenon.
Mortgage rationing was a feature of the housing market when I first qualified as a Conveyancing Solicitor in Bristol in the early 1980’s. It was quite common for a mortgage offer to be issued relatively quickly but with a “not before” date inserted into the mortgage offer.
The Borrower had the benefit of knowing that mortgage funds would be available for drawdown after a specific date, usually 5 to 6 weeks in the future.
The benefit to everyone in the chain of Conveyancing transactions was that the certainty of the mortgage funds allowed an early exchange of contracts, albeit with a extended completion or moving in date
The smaller the gap between agreeing a sale or purchase of your home to an actual exchange of contracts reduces the stress for everyone in the Conveyancing chain.
Every Little Helps
A return to this practice would perhaps be a helpful addition to the current Housing Market.
It would not alleviate the other major problem of high deposits but would be a worthwhile boost to the stirrings in the housing market in England and Wales.
As the soon to be jettisoned Tesco slogan urges "Every little helps"