It’s looking likely that millions of UK homebuyers are about to benefit from long-overdue improvements to the home buying and selling process, the government has announced over the last couple of days! With a new initiative to slash delays and reduce the number of failed property transactions, the Ministry of Housing, Communities and Local Government has unveiled a plan to potentially modernise property transactions, bringing them out of the prehistoric age and into the digital age.
But while this is a step in the right direction, does it really address the fundamental issues facing the UK housing market and mortgage sector? As a mortgage professional with 10 years in the industry, I have seen every outcome possible in a property transaction (Some of them really not good), so the government will really need to bring the wow factor to impress me. In this blog, I will go through the update from the Ministry of Housing and also give my own thoughts.
The Long-Awaited Modernisation For UK Homebuyers
Currently, the home buying process in the UK is nothing short of archaic. With average transactions taking almost five months and a staggering one in three sales collapsing, the system is riddled with inefficiencies. Buyers and sellers frequently lose thousands due to deals falling through, amounting to an estimated £400 million in wasted costs annually. Now, the government is promising change. So what exactly are they proposing to try and tackle these glaring issues?
At the heart of the reforms is a push for digitalisation. Now, being in charge of all things digital for Oportfolio Mortgages, I am a big fan of digitisation. But I have to admit, I did struggle to envision what exactly this could look like for the home buying process. Here is what they are planning.
Key property data, including building control and highways information, will be made more accessible and shareable among trusted professionals. This, coupled with the introduction of digital identity services, should streamline the process a bit more and reduce the need for buyers and sellers to repeatedly verify their identity in person.
Why do they think that this will work? Well, the government has been looking towards international success stories like Norway, where home transactions are completed in roughly one month due to them adopting things like this. However, whether the UK can replicate such efficiency really is to be seen.
How This Impacts the UK Mortgage Market
Of course, the big question for us is how does the streamlining of the UK homebuyer process impact the mortgage process? For mortgage lenders and brokers, these changes could realistically be a game-changer. The mortgage approval process is often hindered by slow-moving transactions and annoying rules. By expediting property transactions through digitalisation, lenders could see a reduction in the time it takes to process mortgage applications and finalise deals. This would provide borrowers with much-needed certainty and security, especially in a market where fluctuating interest rates and economic uncertainty are already causing anxiety.
Of course, there is an argument for not digitising the whole process with the lender. Many banks currently pride themselves on being a ‘human bank’ where every case is individually looked out by a real human being from start to finish. This has it’s benefits…but it is undeniable that it can be a slow process! It’s also important to note that while digitalisation can improve efficiency, it doesn’t directly address the fundamental issue plaguing the housing market: affordability. Property prices remain out of reach for many, mortgage rates are higher than they have been in years, and supply continues to fall short of demand. Without tackling these broader concerns, streamlining the process is like putting a bandage on a broken leg.
Leasehold Reforms – A Step in the Right Direction?
Alongside the home buying overhaul, the government is also introducing long-awaited leasehold reforms. New secondary legislation under the Leasehold and Freehold Reform Act 2024 will come into force on the 3rd of March, making it easier and cheaper for leaseholders to take control of their buildings. The removal of excessive legal fees and greater power over service charges are certainly welcome changes, but they don’t go far enough. The current leasehold system, to me, seems outdated and frankly exploitative, and while these reforms offer some relief, they stop short of the radical overhaul that many leaseholders were hoping for.
Looking to Buy a Home? Get Expert Mortgage Advice
I feel that the new digitisation of the property transaction process proposed by the government is definitely a step in the right direction. It will eliminate some of the more painful and laborious parts of the process, making things smoother and quicker for everyone. We will have to wait and see the results. If you’re planning to buy a property, having the right mortgage in place is crucial. At Oportfolio Mortgages, we help buyers to secure the most beneficial deal. Call us today to discuss your mortgage options. We are here to help.
