For first-time buyers (FTBs), hearing that their home purchase has fallen through can be extremely disappointing but in a volatile environment it is an increasingly common occurrence.
Our recent First Time Buyer Appeal Index shows that a quarter of prospective FTBs have previously started the process of buying a property, only to have it fall through.
The top reasons for their property purchase falling through were: couldn’t secure a mortgage — 14%; and gazumped by a seller accepting a higher offer elsewhere — 13%. Meanwhile, 8% were gazundered and saw their offer dropped at the last minute.
Losing a purchase can cost prospective FTBs over £2,000
FTBs are facing a range of challenges to their ability to save for a deposit, such as the impact of the cost-of-living crisis and high inflation. And, with the average deposit now £61,000, this has steadily become harder. Given the difficulty in proving affordability due to higher mortgage rates, increased expenditure and the removal of the Help to Buy scheme, the overall range of FTB rate options is being reduced.
Brokers can play an integral part in helping FTBs through the homebuying process by setting expectations, offering advice when things don’t go quite to plan, and even helping to avoid a purchase falling through.
Gazumped or gazundered
When another party makes a higher offer on a property than that of the current buyer, the latter can find themselves pushed out of the purchase — gazumped. We know sometimes this can be as a result of market competition. However, there can be functional reasons why a seller can go cold on an FTB, such as being slow on crucial steps like surveys.
Brokers can help make the process of purchasing a property hassle free
Prospective FTBs can benefit from things such as homebuyer protection insurance. If the sale falls through, they can claim back some of their conveyancing and survey fees, and any other associated costs. However, it’s also crucial to set expectations so that your buyer has a solicitor lined up and all necessary documentation to hand once a mortgage agreement in principle is in place.
Meanwhile, although gazundering can lead to a more competitive purchase price, it has the potential to sour or end a deal if not handled correctly. As a broker, you can advise FTBs who want to gazunder, helping them understand the appropriate situations in which they can do so to ensure their lower offer gets approved rather than rejected, such as surprising survey results requiring more work to the property, or if house prices in the area have changed due to wider market conditions.
The latter is particularly common at present as property prices fall across much of the country.
Being declined for a mortgage
Our research shows that 23% of prospective FTBs have been declined for a mortgage, rising to 32% for the self-employed. The main reasons for this include: didn’t have a large enough deposit — 21%; and poor credit history — 17%.
Prospective FTBs can benefit from things such as homebuyer protection insurance
By using a broker, FTBs can take steps to avoid being declined for a mortgage. Brokers know the market and each lender’s criteria, meaning they can match an FTB to a lender according to their circumstances and thereby avoid being declined. However, if an FTB approaches a broker after being declined, there is often the potential to assess the application and see where they went wrong.
Poor credit history
The types of credit issue that FTBs face vary greatly, and may result in their homebuying dreams falling through. Brokers can assess the whole of the market and advise FTBs on which lenders are more likely to accept them, plus suggest ways to strengthen their application.
Any steps taken to improve a credit score can take up to six months to appear on their credit report, so it’s better to act sooner rather than later.
Helping on the homebuying journey
Brokers can help make the process of purchasing a property hassle free, which can be vital for FTBs who may need more guidance.
A quarter of prospective FTBs have previously started the process of buying a property, only to have it fall through
Our research showed that, while only a third (36%) of FTBs had used a broker, mortgage adviser or independent financial adviser, a resounding 91% of those said they had had a good experience.
Having their homebuying dreams fall through has cost prospective FTBs an average of £2,339, further emphasising the importance of a broker in the process.
Jon Cooper is head of mortgages at Aldermore
This article featured in the November 2023 edition of MS.
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