It’s no secret that mortgage lenders are taking longer to process applications than pre-COVID, but why is it still such an issue? Chief Operating Officer, Gavin Richardson, explains what’s happening and how you can help to ensure you complete before the looming stamp duty holiday deadline of 30th June 2021.
2020 has been a challenging adjustment for most businesses, and mortgage lenders are no different. However, with increased demand on the property purchase market at the moment, it’s fair to say that some borrowers are getting frustrated by the increased time it now takes to get a mortgage application to offer. So, what’s going on?
Firstly, like many industries, it’s taken lenders time to adjust to working from home. A combination of finding suitable workspaces, juggling child-care during the lockdown and not necessarily having access to printers and scanners have meant that processes had to change. This adjustment takes time, and actually, I think that as England joins Wales in a second lockdown, the lenders have settled into this ‘new normal’, as many industries have.
Secondly, amongst all these changes of process, the financial fall out for many borrowers due to the pandemic has meant that lenders are now completing more in-depth financial background checks. The consequence of this is they spend significantly more time reviewing each application, and more manual underwriting is required to get the application to offer. Furthermore, while physical valuations are possible, lenders are not able to book as many in for one day as before. Booking inspections around people’s isolation needs requires more logistics and surveyors need time to apply and change PPE between visits, meaning everything is taking more time!
Finally, and in addition to everything else, the enormous demand on the property market at the moment means they are dealing with record numbers of applications. The pent-up demand from 2019’s late election, the Brexit deadline and the first lockdown meant the market sprung into life as soon as physical valuations resumed in May. Two months later, the announcement of the stamp duty holiday added to the incentive for people to move home. Despite the pressure, the lenders produced record-breaking numbers of mortgage offers this summer, so there’s no doubt that they’re working incredibly hard.
How long does it take to get a mortgage offer?
While it is frustrating waiting for your mortgage offer, especially when there’s a lot of time pressure, there’s no doubt that the lenders are doing everything they can to get through the volume of work and under challenging circumstances. However, as a property investor, it’s essential to have a realistic expectation of the mortgage market at the moment. Pre-COVID, we would advise clients to expect a buy to let mortgage offer within three to four weeks. Now, the average is four to six weeks. When you then consider that solicitors will also have this additional workload, the whole process to completion is going to take a lot longer than usual!
It’s important to note that the recent extension to the Mortgage Payment Holiday scheme will add to the lender’s workload, diverting staff who would usually be processing mortgage applications to helping those in financial difficulty. While the 30th June may seem like a while away, if you want to ensure a completion before the deadline, you need to submit your application within the next couple of weeks, at the latest!
How can you help ensure your purchase meets the deadline?
The key to getting your mortgage application to the front of the queue is to make sure you have all your documentation together and submit everything at once. If you submit paperwork piece by piece, your application won’t join “the queue” until everything is submitted. As brokers, we know precisely what documentation lenders require and can package your application up for you and submit it. Furthermore, as an intermediary, we have access to lenders’ online portals, which makes submission quicker and allows us to track applications as they’re processed.
We keep records of each lender’s processing times, which means that if you are looking for a faster mortgage offer, we can advise which lender will be most likely to meet your requirements. We also have access to specialist lenders which only deal with intermediaries, which have existing processes often better equipped for dealing with more in-depth due-diligence checks. As many of the high street lenders rely on automated credit scoring tools, they don’t usually have to complete the type of manual underwriting which is currently required. The specialist mortgage lender market is more accustomed to assessing cases on an individual basis and have been less impacted by the increased demand. By using a broker, you will gain access to this market, broadening your choices and increasing your chance of completing before the stamp duty deadline.
The mortgage application process
What is a mortgage in principle?
This early step for a buyer will allow you to prove to lenders that, in principle, you are able to afford the mortgage you’re applying for. This can also be called an agreement in principle but really has the same meaning, which is an initial agreement by a lender that they are prepared to loan you a certain amount to purchase a property.
For a mortgage in principle, you provide certain basic information to a mortgage lender so that they can determine your creditworthiness. They’ll run a credit check and also request information such as your employment details, proof of income, and identification. This is no guarantee that your application will be approved but it can speed up the process. It’s important you’re honest about income and other outgoings as while you may secure a mortgage in principle, due-diligence checks during underwriting may prevent you from securing a formal mortgage offer.
Completing the mortgage application
Once you’ve received an agreement in principle, you will fill in your mortgage application which can take a couple of hours. Lenders will usually require proof of the following:
- At least 3 months bank statements including monthly payments on other expenses
- Payslips dating back to the last 3 to 6 months
- Identification documents such as a passport or valid ID
- Proof of address such as a utility bill
- The information of the property you want to purchase
- Proof of your deposit on the property
When does a property valuation surveyor inspect the property?
After submitting a mortgage application, the mortgage lender will want to be sure that the property you want to buy is worth the amount being asked for. To do this, they will use a surveyor to inspect the property and submit a report detailing any possible concerns.
How long is a mortgage offer valid for?
If your mortgage application has been approved the offer would usually be valid for 6 months. Some lenders may have a different time limit on the offer, after which, if no action has taken place you may need to resubmit the application so that it reflects your more recent circumstances.
Will a mortgage application take longer if I have a poor credit history?
Some lenders will look into the severity of the bad credit in question. If you are able to place a larger deposit down on the property while also proving that you can afford the monthly mortgage payments, you might be able to borrow. A mortgage broker who has vast experience in mortgage applications would be able to give the best advice.
Where can I contact a mortgage broker?
If you’re looking to secure a new purchase and are worried about meeting the deadline, or are having difficulty securing a competitive rate in the fast-moving market, give our team a call on 0345 345 6788 or email firstname.lastname@example.org. Our experienced buy to let, residential and commercial teams will be more than happy to help you out!