With house prices falling and buyers holding all the cards, gazundering is a growing threat to already precarious property chains, experts have warned.
Speaking with Newspage, property and mortgage professionals have noted a steep rise in gazundering as of late and have shared their thoughts on how this may affect the market going forward.
Lewis Shaw, founder of Shaw Financial Services, said: “Gazundering is proving increasingly common at the moment.
“At the eleventh hour, buyers are trying to pull a fast one and that’s crippling chains.
“On the whole, chains are taking too long, all parties are getting hacked off, and some are calling it a day.”
Kundan Bhaduri, director of The Kushman Group, agreed, adding that down-valuations and archaic legal processes are also throwing a spanner in the works.
“Gazundering is on the up, as are failed surveys due to down-valuations”, he said.
“Archaic conveyancing taking forever doesn’t help with the complexity involved in long chains, either.
“The fragile links in property purchase transactions are increasingly snapping under the weight of all these factors.”
For Rhys Schofield, brand director at Peak Mortgages and Protection, gazundering is less of an issue than down-valuations: “I don’t think gazundering is as much of a problem as over-zealous surveyors finding fault in good quality properties, telling the lender that’s appointed them that the property isn’t suitable security for a mortgage.
“We’ve had three cases in the last month rejected by valuers for being close to pubs alone.
“We’ve managed to replace every case by going to lenders that use a different surveying firm, and at better rates as rates have fallen, but it is frustrating and scary for clients.”
As well as noting the impact of down-valuations on property chains, David White of Simply Lending, said mortgage rate volatility is also hitting chains hard.
He added: “Two primary causes of chains breaking are the down valuing of properties and fluctuating mortgage rates.
“Surveyors, seemingly more cautious now, frequently devalue properties by less than £10,000 without clear justification.
“The instability of interest rates further exacerbates the situation. Before a mortgage application is locked in, a buyer’s arrangement can unravel the instant a lender adjusts their rate.”
White’s views were echoed by Richard Campo, founder of London-based Rose Capital Partners.
He said: “One reason we have seen an unusually high amount of chains fall through is when old mortgage offers expire.
“Depending on when you agreed the purchase originally, the ‘new rate’ could well be 1%-2% higher, which some borrowers are simply unable to stomach.
“This is felt particularly acutely in the buy-to-let market where stress tests have also increased substantially, meaning not only is the rate higher, but the loan on offer has decreased by 10% to 15%.”
Sophie Pollard, director of MyHaus Brighton, is seeing much the same thing: “One of the main factors in chains falling apart is affordability and ever-changing mortgage rates and products.”
Charles Breen, director of mortgage broker, Montgomery Financial, also noted the instability of property chains at present.
He added: “Chains are most certainly more precarious than they were previously.
“A lot of this is due to completions taking so long that people are falling out of love with the property, have longer to keep looking online to find something new to purchase or simply that the mortgage offer a person in the chain has runs out, and they now have the option of completing the purchase at a much higher rate and are baulking at the new payments, so are pulling out.”
