Buyers want to delay completion in case interest rate falls

[foodiefil]

We are due to complete on our sale and purchase this week - Friday.

Our solicitor just called and said our buyers want to delay completing until 8/11 because they think interest rates will come down and there will be cheaper mortgages available. They’re first time
buyers.

Any thoughts on this? I understand there is a meeting in Nov and the interest rate could come down again but doesn’t mean banks will change their deals that Quickly does it ?

I think your buyers are right. My husband is a finance professional and is predicting a cut.

It’s annoying as hell for you, though. The announcement has been known for months so I don’t understand why they wouldn’t just have set a later completion date in the first place.

I can also understand why they’d want to do this, though I don’t think I’d have the balls to ask in their position!

Are you in a chain?

If you've exchanged you can penalise them I think, they're contracted to complete on the day you initially agreed.

Also they will have to go through at least some of the mortgage application process again, won't they, as their offer will be specific to a particular product? Might be wrong but worth checking.

Even if rates go down, there is no guarantee that rates will change for their product especially if FTB with high loan to value. But they’ll have to get reapproved for a new mortgage at a new rate which will take time. I’d be annoyed and relisting.

Have you exchanged OP?

Which country are you in?

Have you already exchanged contracts?

The next Bank of England decision is scheduled for Thursday 7 November.

Even if some banks do announce a lower interest rate straightaway, I don't see how your sellers will have a new mortgage in place by Friday 8th. Unless their bank is offering to reduce the rate immediately to mortgage-in-principle customers - is that possible?

This could delay you by weeks if not months. But depends how many offers you had. A bird in the hand, etc…!

Please ignore if this is your main home. If not, I expect Capital Gains Tax rates to increase significantly following the budget announcement this week, not known yet when this would be effective from.

If you have exchanged, completion is contracted, if not then yes they can delay exchange and completion.

Not surprised they are FTB, they probably do not realise they may need to reapply for mortgage etc, unless they are on a tracker.

I think they are being cheeky though.

Mortgage rates don't always track BOE rates. Actually they track swap rates.

The BOE puts a floor under the price of money, but it doesn't set it. Maybe 40 years ago it was truer to say mortgage rates were more correlated to the BOE base rate, but now the price of money demanded by international money markets is more reflective of what the cost of money actually is.

I don't have a crystal ball, but I think we could be entering a period where mortgage rates actually increase while the BOE wants rates to actually fall - but it depends on a lot of things, not least the Labour budget. In fact there is unlikely to be significant divergence as the BOE rate more plays catch up with the markets and reflects where they are going as opposed to diverging significantly.

If I had to guess I think in the future we might expect plenty of comments like "we are keeping rates high to fight off the spectre of inflation" which roughly translates to "we want to lower rates but are powerless because the markets won't let us because of the divergence between what we want to be our floor and their demands".

This would delay everything by a long while. They'll have to reapply for mortgages, and I imagine a lot of people will be applying for mortgages if the rates fall, so they may be waiting a while! They committed to buying the house with the current rates, so they need to suck it up.

@foodiefil As others have said, they will have to apply for a new mortgage if the rates do fall, so it is unlikely to be 8/11 for completion if the rates do fall on that date. Also, if the exchange has been done, they will surely need to pay a penalty? I would not be agreeing to this if you don't have to.

What will the people you are buying your new home from have to say about this?

It’s IMO unlikely that mortgages are going to drop that significantly, and even if they do drop, it won’t be overnight, so the buyers will have to bide their time to see if A, the mortgage rates drop, and B, if they are successful again. Either way this is likely to take months, and you’re at risk of collapsing the chain.

I would tell them no, and if they’re not prepared to go with that I would pull out.

To answer some questions:

We haven’t exchanged contracts - that was planned for Friday. They actually initially insisted on being in by the end of the month because they’re in rented and we could get to Friday as we had been waiting for local searches.

We are in England.

The people we are buying from have already left and the property is vacant - they were emigrating- the thought of the chain collapsing is making me feel dreadful for us and them.

I completely agree with those saying this meeting and/or budget doesn’t mean banks will change their rates as quickly. Seems a futile delay.

If the rates fall, they will have to get a new mortgage? that will take time - I would say no - exchange this week

Thank you for answering the questions. Not having exchanged sadly does favour the buyers. I would suggest you ask your solicitor to inform their solicitor you wish to proceed as planned, as the buyers reapplying for mortgages etc is likely to lead to further delays, and see what, if any response, there is.

I also think you need to be pragmatic - would a delay of any length stop the sale proceeding? If not then maybe take a deep breath and let it happen. Not saying I think the buyers are correct though.

Thanks all. I understand we can’t put their arms up their backs and force a pen into their hands to sign contracts but I hope they understand the real delay this could cause.

I would say completion date can change but you still want to exchange this week.

Ok panic over they’ve agreed to complete on Friday.

Omg!!

Ok now let this thread become a moving house tips thread!!!

Nope. The smart lenders would have already dropped their rates if they thought it was going to happen - they seem to have insider knowledge, from me watching them over the last two years.

Also, depending on the size of their LTV, the amounts involved will be piddling. Unless your house is £1m? For each 0.25% the BoE drop the rate the FTB @ 90-95% LTV may be looking at a mortgage rate reduction of 0.04 - or 0.08% if you are very lucky. I know this because I have literally tracked it, as I am an FTB who has been looking for over two years.

The stupid lenders will take 3-4 weeks to change their rates. Which takes you to mid December.

Unless they are on the breadline I think they are trying to use their status as FTBs against you and are CFs.

I can copy and paste you what I sent myself tracking what happened the last time a rate change happened, if you like.

@foodiefil Good news. However are you exchanging and completing on the same day then? Or is just the exchange this Friday? I'm a bit confused!!

You need to exchange now, there is no reason now - please do not think this is over if you are exchanging and completing on the same day. Also, sorry to say you should never complete on a Friday, too many things can go wrong!

I’m confused too @Silvers11 our solicitor is emailing forms and we will print sign and return today.
Then “complete” on Friday which I understand to mean the funds will be transferred and keys swapped?

arggghhhhhhhh