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If you’re trying to buy a property that is in demand, obtaining mortgage offers quickly can often be the difference between success and failure. Bering able to prove to a vendor that your high value mortgage is in place can often put you in pole position to buy a property.
Now, new EU rules may be set to extend the time it takes lenders to issue mortgage offers. While the new European directive is aimed at making mortgage offers binding, industry experts believe that it will also take longer for offers to be produced. Keep reading to find out more.
A new EU mortgage directive is set to come into force this autumn having already been given draft approval by the EU’s member states. As well as bringing in controversial changes to the way that interest rates and APRs are displayed on mortgage marketing the directive will also make mortgage offers binding.
The controversial changes to APRs have already been criticised by experts who believe that they will further confuse consumers and make the process of choosing a mortgage more difficult.
Now, the EU’s plan to make mortgage offers binding has also attracted concern. While the aim of the initiative is to give consumers certainty that their large mortgage offer will be binding, brokers believe that it will add additional time to the application process and result in delays in producing offers.
The European directive states that ‘member states shall not allow a creditor to terminate a contract on the grounds that the information provided before the conclusion of the credit agreement was incomplete.’
Speaking at the recent Financial Services Expo in London, FCA manager of mortgage policy Linda Blackwell said the rule would mean lenders would have to obtain more information from the borrower as a result.
Blackwell said: “Lenders are going to be taking a much closer interest in the questions being asked and brokers may find themselves having a greater information gathering role.
“This could amount to a far more significant delay in the sales process than the separate new directive requirement for a cooling off period.”
Islay Robinson, CEO of London mortgage broker and million pound mortgage specialist Enness Private Clients said: “In theory, this is a good idea as it will give consumers the confidence that once their mortgage offer is issued, it is binding and cannot be withdrawn.
“However, for lenders to be in a position where they can issue a binding offer they will need to be sure that they have collected every piece of information that they need. This means that high value mortgage borrowers and brokers may have to become more involved in the application process in order to provide all the information that a lender may need.
“With lenders already collecting more information than before the financial crisis, I’d hope that this change wouldn’t adversely affect the time that it takes to produce a mortgage offer. However, with many lenders already struggling under the weight of applications it is clear there will be some delays,” he added.