The trouble with mobile mortgages

Competition among lenders has handed buyers a get-out-of-completion card, says Christopher Browne. But has the dithering gone too far?

Homebuyers are a ruthless bunch. Suddenly all our new-found enthusiasm for low interest rates and bargain mortgages has been cast aside in our relentless quest for The Deal. Principles? Good will? "Who cares," we say. "It's cash and comfort that matter, not character." I exaggerate, but the fact is quite a few of us are happy to break our link in the chain and forget about the sassy-looking semi-detached or cosy country cottage we were about to buy while we snap up another one around the corner. Then, hey presto, the sale falls through amid dark mutterings about chain-breakers and low-lifes.

Homebuyers are a ruthless bunch. Suddenly all our new-found enthusiasm for low interest rates and bargain mortgages has been cast aside in our relentless quest for The Deal. Principles? Good will? "Who cares," we say. "It's cash and comfort that matter, not character." I exaggerate, but the fact is quite a few of us are happy to break our link in the chain and forget about the sassy-looking semi-detached or cosy country cottage we were about to buy while we snap up another one around the corner. Then, hey presto, the sale falls through amid dark mutterings about chain-breakers and low-lifes.

So what's made us such a hard-nosed bunch? The answer is competition. The property market has got so hot that in their quest for business, lenders are relaxing the rules on mortgages, allowing borrowers up to six months' waiting time as they join the Great Property Swap. "It's a real buyers' market. Purchasers are now more discerning about what they buy and are quite happy to pull out of a property chain if, at the 23rd hour, they find a better opportunity elsewhere. It often means three or four people are forced to pull out as well," says Kevin Duffy, managing director of Hamptons Mortgages, part of the Hamptons International group.

Three years ago, the average buyer found a house or flat, made an offer and raised a mortgage. End of story. Now you can pre-book your property several months in advance just like an airline ticket as lenders, like airline companies, put you on a reservation list and offer you their thoroughly mobile mortgage. Which makes it all too easy for the chain-breaker, who knows he can pull out of a deal and use his loan to buy a property elsewhere.

"Lenders have become one-stop shops. Instead of acting like small airports that handle only one or two routes at a time, they have turned into large international terminals with access to many different destinations. And while you used to get a mortgage with a short time span, you can now have one with six months' waiting time," says Duffy, whose company was voted 2003 Mortgage Broker of the Year by Money Marketing magazine.

Selling chains are sometimes broken because of the sheer volume of mortgage products - around 8,000 at the last count. Suddenly buyers are spoilt for choice. "Almost every mortgage broker has access to a variety of clubs from whom they source preferentially priced products, so if your loan falls through, you can instantly replace it with another from one of the lenders in the club," says Duffy.

Demand - or, in some cases, lack of it - has added another link, says Phillip Ambler, a Chesterfield-based independent financial adviser and chief executive of the Mortgage Advisers Association. "Instead of moving from a three-bedroom semi-detached house to a larger and more expensive one, many buyers are preferring to buy a similar-sized house in a better location. As a result there are far more people chasing the same middle-of-the-range properties."

According to a Hamptons report, longer chains and complicated conveyancing have delayed average buying times by almost a third in the past year. This means the average wait from offer to completion has risen from two months to 11 weeks. Though chains don't usually affect buy-to-let property sales, completion times for these have doubled in the last year; it now takes almost three months to clinch your deal. "The balance has shifted from sellers to buyers, most of whom are not willing to be rushed in the current climate," states the report.

But there's good news if you're about to remortgage. The average deal now takes 39 days - a 100 per cent gain on last year's total. The secret? A new form of cover, known as title insurance, means lenders can forego those lengthy local searches. "Up to now, lenders have been repeating searches made when you first bought the property, although, in many cases, the circumstances haven't changed," says David Hollingworth of London and Country Mortgages (L&C).

Ambler adds: "You can also speed the process considerably if you go online to do your mortgage application, find a conveyancer or carry out the basic searches." L&C gives 28-day completion guarantees on certain products. "If the deal takes longer than the guarantee, we pay the client's extra costs. We've certainly found that the longer the conveyancing, the greater the chance the chain has of collapsing," says Hollingworth.

It's a good point - and well-made. So come on, you brokers. More guarantees and time-limits, please, to cut those notoriously long buying times - and that nasty little habit known as chain-breaking.