Tough new rules to speed mortgages

REFORMS AIMED at taking much of the pain out of house buying are to be unveiled by the Government today.

Mortgage lenders will be expected to deal with 80 per cent of applications for loans within two working days under rules proposed by the housing minister, Hilary Armstrong. Buyers will have much more information at the start of transactions, with the onus of carrying out local searches, and possibly surveys, being put on vendors before they put properties on the market. This will take care of much of the time-consuming but relatively straightforward work before negotiations take place.

The Government says its plans, put together after a nationwide survey on the angst involved in buying and selling property, will fast-track the process, make it cheaper, and go some way towards combating the practice of gazumping.

The survey showed there was an average eight-week wait between acceptance of an offer and exchange of contracts. At present, in most cases, an offer is agreed before the time and money-consuming processes of a search, getting title deeds and answering legal questions. Almost 25 per cent of deals start to run into difficulties at this stage. Gazumping, in which the seller pulls out at the last moment in favour of a higher offer, should become less prevalent because of the greater speed in the transaction. It should also help to limit "gazundering", when a buyer suddenly lowers the offer just before contracts are exchanged.

The issue of whether the vendor should include a survey as part of his or her obligations is expected to generate controversy. A compromise could be a "log-book" carrying a "service history" of the property.

This is the latest move in a government shake-up of the housing market. Last month plans were announced to overhaul the leasehold system, giving almost 2 million people in leasehold properties the right to buy or manage the freehold of their homes.

A spokesman for Bradford and Bingley, Britain's second- largest building society, pointed out that mortgage lenders have to depend a lot on third parties for verification of earnings before they can offer a loan. He added: "On principle, the quicker we can grant the mortgage the better."

The government measure comes after the Council of Mortgage Lenders (CML) warned that borrowers should take steps to guarantee that they can pay their mortgages.

The CML, which represents Britain's banks and building societies, said the housing market is unlikely to suffer the boom and bust of previous economic slowdowns, but is likely to be dampened next year by the economic uncertainty. The organisation stated, however, that there will be good news for borrowers in the form of lower interest rates.

A CML official said about the proposed mortgage reforms: "We are all in favour of expediting the time it takes for the mortgages to be arranged, so we welcome any attempts to do so, but there are many variables, such as having to depend on outside parties."

House prices rose by 5.4 per cent this year. They are expected to go up by 3 per cent in l999 and 2000, roughly in line with inflation forecasts.