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Borrowers Should Get Their House in Order Early as Cooling Off Period Risks

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Home buyers need to seek their mortgage offers early as new rules designed to protect them risk holding up their purchase. That is the message of expert property lawyer Andrew Davies, who says the new Mortgage Credit Directive may lead to pressure in a property chain if borrowers leave things too late.

The new rules, created by the European Union in March but adapted by the UK government to fit in with existing rules, give all borrowers a seven-day cooling off period after a lender has offered them a mortgage. They are in place to help prevent reckless lending while ensuring borrowers have the correct information to make a decision that will affect their life for many years to come.

However, Mr Davies is concerned that during this period conveyancers cannot carry on with the purchase of a home unless the buyer waives their rights as lenders will otherwise not release funds until the cooling off period has ended.

Mr Davies, a partner at West Midlands law firm mfg Solicitors said: “The new rules potentially open buyers up to pressure elsewhere in the housing chain if there are other buyers or sellers that want to get moving.

“The UK government has not just copied the EU’s Mortgage Credit Directive, but has instead built its principles into the existing rules. The seven-day cooling off period offers important protection for borrowers to consider carefully whether the mortgage is the right one for them.”

“However, it is vital buyers make sure they have organised their mortgage as early as possible in order that this protection does not cause a delay that puts pressure on other buyers and sellers in the chain, some of whom may threaten to pull out if things are taking too long.”

Mr Davies added: “If the new rules are implemented too heavily, there is a risk that it will affect the availability of cheaper mortgages. There are now more stringent checks on whether the borrower can afford the mortgage. This applies even if someone is re-mortgaging to a cheaper deal than they are on now. If their circumstances have changed, they may find themselves stopped from taking a mortgage that would actually be easier to continue paying than the one they’re trying to replace.

“That is something the Financial Conduct Authority and lenders will have to keep a careful eye on.”