New build developers exchanges

There needs to be a stricter regulation in place for new build developers. The four week contract exchange deadline was impractical and stressful before 2022. However, In this years market it is impossible, and often leads to a detrimental outcome, emotionally and financially for the buyer. Clients have secured a mortgage offer on a competitive and affordable mortgage deal, but it can be up to 9 months, I have even seen 12 months, before the new build house is ready for completion, this means offer expiry, new deal and huge hike in the interest rate for the client. Worst case scenario with interest rates doubling in the last 6 months, their dream home, that they have already exchanged contracts on, is no longer affordable. This should not be happening.

This is a real issue. There is no way in my opinion that anyone should be exchanging contracts on something with no build date confirmed. Aside from the fact that in nine months we have seen rates triple, the cost of living crisis also means that lenders affordability calculators have got stricter so a client may well have exchanged contracts on a transaction that now no longer fits on affordability. Not being able to complete has serious financial implications for the customer once exchanged, whereas the builder just gets to sell to the next person. That doesn't seem fair to me.

This kind of dodgy practice should be made illegal. It's made even more egregious by the fact many new build homes are sold to inexperienced first-time buyers. Whilst an exchange without a confirmed completion date is great news for the property developer, it potentially leaves the buyer on the hook for thousands of pounds. If their mortgage offer expires, they could find themselves needing a new, much more expensive mortgage offer which turns out to be unaffordable. In that scenario, of course, the developer pockets the agreed non-completion fee. These unethical developers should be named and shamed.

What new build developers can get away with in this country is bewildering. There's a simple solution to this though: at exchange, a completion date must be set. If the developer is not able to hand over a signed off property by that completion date any costs that are incurred by the buyer, such as rent, increased mortgage interest if the mortgage offer expires and storage of belongings, must be paid for by the developer. If that happened, they'd soon get their act together. The whole set-up right now is geared towards the developers and can leave buyers out on a limb.

I have a case like this on my desk at the moment. The client's completion date has been put back, put back and then put back some more by the developer. This is not uncommon at the moment as they are struggling for materials and labour. However, in a market of rising interest rates this means that lenders are in turn struggling to maintain the rates previously offered to borrowers. The new build market and mortgage market are now deeply out of sync and it's causing chaos. We're seeing build times that are far longer than many mortgage lenders are now able to hold applications and offers open for, which is a problem when builders are still insisting on exchange 28 days after reservation, even when they don't think they will have the property built for nearly another 12 months.