Moving Home In A Seller’s Market

Anna Green Mortgage Adviser at Progeny looks at what homeowners should be considering if they are looking to move home.

For existing homeowners looking to move, one consequence of the continuing seller’s market is that whilst they may sell their own property very quickly, they are equally within a very competitive market in terms of buying their next home.

One possible course of action, if faced with no onward purchase and a buyer keen to press on, is moving into rental accommodation. This can afford some much-needed breathing space but is often coupled with concerns about the implications of stepping out of the mortgage market and uncertainty about how the current rental market functions.

The benefits of being chain free

Let’s firstly look at the positives of this route. Moving into a rented property turns you into a chain-free buyer, which can be more attractive from a vendor and estate agents’ point of view.

When you do find the right property, you will be in a position to move quickly and the lack of an onward chain can also mean there is less chance of things falling through once your offer on the property has been accepted.

If you had your sights set on a new build, being chain-free can also be beneficial. Most developers want an exchange within 28 – 35 days, but are unable to give a set completion date. The way round this is via “completion on notice” which is when exchange takes place but completion does not happen until the property is ready.

However, one effect of this is that if there is a chain, everyone in it has to be ready to exchange without a set completion date. Typically, this makes planning for a move into a new build very challenging for anyone in a chain, but if you are renting you can avoid this potential difficulty.

If you are moving to a new area, renting also gives you the ability to familiarise yourself with the location and work out exactly where you want to buy.

Time out of the mortgage market

Now let’s consider the areas where people often have concerns.

Assuming this sale doesn’t turn you into a cash buyer, people are often worried that too much time out of the market will make it harder to get a mortgage again in future. Time out of the market is not a factor in itself in suitability for a mortgage but people do need to consider how their individual circumstances might change over the period of time before they apply for a mortgage again.

This could include things like a change in salary, the birth of a child and new borrowing such as car finance or other additional debts. All of these things could affect the amount that could be approved to be borrowed and it should not be assumed that you will be able to borrow the same amount as your current mortgage again in the future. External factors such as inflation, tightening on lending criteria and interest rates increases can all additionally have a restrictive impact on this.

Depending on the type of mortgage you have, there could also be an early repayment charge if you step out of the mortgage market. However, most lenders will allow between three and six months between selling and buying to refund any early repayment charges made when selling, if you take out another loan with the same lender.

The rental market is also competitive, especially in cities, and if you have pets, it can also be more difficult to find something suitable. Most landlords currently want a 12-month tenancy, although you may be able to agree a mutually acceptable way of ending the tenancy with your landlord, if the right property comes along. If you think you only need to rent for a matter of months however, there are a number of agents and specialist companies who deal in short term lets.

In summary, moving home generally has its stresses, regardless of whether you decide to buy straight away or rent first. However, doing plenty of research, speaking to your mortgage adviser and using all the tools and apps at your disposal, will help make sure that you have your finger on the pulse of the market in your desired location and in the best possible position, whatever your chosen route.