Beware MMR transactions falling through

The Conveyancing Association (CA) has warned that the new MMR rules that came into force on 26 April could cause delays to the home-buying process.

The new rules aim to ensure that only those who can afford mortgages are able to secure them but could cause a backlog in demand and may even cause an increase in the number of transactions falling through in some rare cases, the CA cautioned.

Spokesperson for the CA, Kathryn Taylor said the implications of MMR means lenders are more likely to be cautious in issuing mortgages, which may impact the whole property market.

Taylor, a managing partner at Gordon Brown Law Firm LLP, noted that first-time buyers, who have recently been benefiting from the government’s Help-to-Buy scheme, are most likely o be affected by the changes, especially as their basic living costs – which applicants will be required to outline under the new rules – will be higher.

As the rules now require a more stringent assessment, Taylor believes the increased probability of declined or elongated mortgage approvals will cause delays to the home-buying process in general, as “vendors will be less inclined to accept an offer until they have proof that the buyer’s mortgage has been approved.

“This may mean we see an increase in the number of transactions falling through at initial stages — although in the long term the risk of offers being withdrawn should hopefully decrease with in-depth assessments being carried out from the outset.

She also warned that existing offers may get withdrawn between exchange and completion if there has been “a material change, as the new rules are used to re-assess the applicant” and that considerable delays could take place as the lender puts together the affordability information, which may result in completion dates in contracts being missed.

To avoid this risk, more conveyancers could choose to exchange and complete on the same day.

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