In some areas of London and the South-east, where gazumping and contract races abound, trying to arrange a mortgage after you have made an offer on a property may mean you miss out and someone else clinches the sale.
Lenders are not delivering on time. Recently, I contacted the Halifax about one of its competitive five-year, fixed-rate mortgage deals, only to be told that the interview I had to have would not take place until the following week, and that the mortgage approval process would take up to three weeks.
With survey costs of about pounds 600 for the house, a mortgage arrangement fee of pounds 195, and legal costs of pounds 300 or so, I could not afford the risk of waiting for the Halifax and almost certainly losing the property.
Ian Darby, marketing director of the mortgage broker John Charcol, says that because of the pressured climate borrowers might have to pursue less competitive deals to get hold of a loan in time. Lenders with the best products in the market are likely to become snowed under with applications. Last summer, deals from the Bristol & West building society were so popular that borrowers waited up to 12 weeks to get their approvals through.
But processing speeds vary between providers, and regions. Brokers say the average is about 21 days. The Nationwide says that in exceptional circumstances it has processed urgent applications in 24 hours; Cheltenham & Gloucester says it has a two-week turnaround but can deliver within five days if all the necessary information is to hand.
Direct, phone-based lenders can speed up the initial agreement. Direct Line says it can deliver an initial decision within 20 minutes, Nationwide Direct an agreement within a few hours. Going direct may also circumvent local branch-based bottlenecks where the housing market is booming.
Robert Clifford, managing director of the Nottingham-based broker MPI, says that getting a mortgage through brokers who do a lot of business with lenders can help borrowers jump the queue. Mortgage brokers have far more leverage, he adds, since lenders are prone to putting their repeat business above one-off loans to members of the public. Brokers can charge a fee of up to 1 per cent, but they may know which lenders have the worst delays. One way to avoid hold-ups is to anticipate the information requirements of lenders and keep track of the progress. Patrick Bunton, manager of the Bath-based broker London & Country, says that by showing the past three years' mortgage statements, invariably there will be no need to present a reference. People renting could ask their landlord for references.
Lenders generally want to see payslips dating back three or six months, bank statements, a P60 and proof of identity. They may also check insurance or endowment documents and two or three years' of accounts from the self-employed. Omit relevant details and your loan could be delayed or, in some cases, refused altogether. Mr Clifford says customers often forget to mention previous financial commitments, including car loans, store cards and maintenance payments. If you have been in arrears or have county court judgments against your name, these must be mentioned, too.
Lenders then require employers' references and need to value the property. For fast references, use faxes. If you have worked for other firms in the past three years, warn your lender about these as well.
In the most fraught parts of London and the South-east, such moves may, of course, prove to be of limited use so rapidly are properties being sold. Here, estate agents want eager buyers to have a mortgage offer in their hands before they even consider an offer on a property.
Mr Darby says that his customers in the worst-affected areas are looking for loan agreements in principle from lenders before searching for properties. This procedure can involve everything but the valuation - but it can also mean paying a fee - perhaps about pounds 200 for fixed-rate mortgages.
Dido Sandler works for 'Financial Adviser'.Reuse content