As many as one in three housing deals are falling through because buyers cannot get the mortgage they need as more lenders retreat from the market. Buyers are discovering that money is not available in spite of agreeing on a purchase, according to estate agents, or that the bank valuation of their house fails to match the price agreed.
The number of mortgages on offer has fallen sharply this week. By Friday, 22 per cent of deals available a week earlier had been withdrawn, according to Moneyfacts.co.uk. HBOS, the
’s biggest mortgage lender, on Friday increased its minimum deposit to 5 per cent from 3 per cent, and said it would penalise those borrowers putting up less than a 25 per cent deposit on the property. UK
The effect of the lending freeze, and falling house prices, has been severe, with transactions down between 30 and 35 per cent, according to leading sales portal Rightmove. The number of estate agency office closures has more than doubled to about 10 per cent as a result, according to Ed Williams, managing director of Rightmove.
Deals are becoming difficult to secure, say agents. “The fall-through rate has gone up dramatically in recent weeks to around 35 per cent,” said Marc Goldberg, head of residential sales at Hamptons International. Normally the figure would be between 10 and 20 per cent.
Paul Jarman, head of residential agency at Savills, estimated that 20-25 per cent of its sales were falling through, mainly because funding was being withdrawn. Valuers for banks were finding that some houses were worth 10 or 15 per cent less than the agreed price, Mr Jarman said. “People regularly agree to buy without finances lined up,” added David Livesey, chief executive of Connells, which operates 500 branches.
Estate agents Knight Frank and Chesterton report a similar trend, particularly at the cheaper end of the market. Transaction times had also doubled, according to some agents, as banks become more nervous about due diligence. There are now just 4,270 different mortgage deals in the market, compared with 15,599 last July. More lenders are expected to increase rates next week.
♠ Posted by Emmanuel in Europe at 4/06/2008 12:36:00 AMHo-hum, where have we heard this story before? Those who have lined up to purchase houses are backing out because they are unable to obtain financing as contract terms become less lenient. Just like the US economy, the UK one is powered in large part by finance, spawning excess consumer debt and inflated property values. Both seem to be headed south, bigtime. From the Financial Times: