Home buyers face waiting weeks for mortgages as banks and building societies have been overwhelmed with applications following the stamp duty tax giveaway.
Many banks are operating with reduced staffing levels because of the coronavirus pandemic, with the majority of employees working from home. This has left some lenders struggling to cope with the number of mortgage applications being submitted.
Mortgage brokers said some simple cases, which would usually be approved in a matter of days, were taking more than a month to process.
The stamp duty holiday has caused a sudden increase in interest in the property market and demand for mortgages has soared, especially among first-time buyers.
A report issued this week by Defaqto found that 10 new 90pc mortgages had been launched in the past three weeks. However, there were just 28 available in total, well below normal levels.
Chris Sykes of Private Finance, a mortgage broker, said banks offering 90pc mortgages were struggling to process applications in a timely manner, given the demand for such loans.
“Lenders are still not working at full capacity,” he said. “A lot of industries have been able to seamlessly adapt to working from home, but it seems in the banking space some lenders are reporting a drop in efficiency coupled with extreme demand.”
Mr Sykes said that some complex cases, which were paused during the property market lockdown, were still being processed. He feared that the situation would get worse before it got better, given the increased demand caused by the stamp duty tax break and demand for cheap mortgage deals.
Rates have fallen in the last year, prompted by two emergency cuts to the Bank of England’s Bank Rate. Moneyfacts said the average two-year fixed-rate mortgage was available with an interest rate of 2.07pc at the end of July, compared with 2.48pc a year ago.
As well as affecting the larger lenders with competitive rates, some smaller building societies have also seen mortgage timescales lengthen. In some cases, Mr Sykes said that cases were taking 18 working days to process, effectively adding a month onto the house buying process.
“We are not seeing signs of these timescales getting any better,” he said. “Lenders can hardly train new staff if they can’t have them in the office, and demand definitely hasn’t slowed.”
The banks with the fastest processing times tended to be those with less competitive rates, he said. As well as banks taking longer to make decisions, there can be other delays.
Mr Sykes said surveyors had also been deluged by cases and were able to carry out fewer inspections because of social distancing regulations. He encouraged potential home buyers to consider their mortgage options much earlier in the transaction process than normal to prevent any delays.