Should 100% mortgages be welcomed or feared?

Over the past few months, the mortgage market has never been out of the news. It all started back in the days of ‘Trussonomics’ and since then interest rates have spiralled which has resulted in more and more deals being pulled by lenders. There has been huge speculation on whether house prices will fall off a cliff but so far the age old issue of demand vs supply is keeping things on a relatively even keel.

However, one trend which has started to bubble away is the re-emergence of 100% mortgages. Some see this as an exciting development for the conveyancing sector that could turbo charge the market even further but there are some issues that shouldn’t be ignored.

On the positive side, 100% mortgages will, potentially, throw a lifeline to thousands of first time buyers who struggle to save substantial deposits – a status quo that has held people back and been the accepted norm for years. That increase in accessibility and availability will surely open up the housing market and will drive work for conveyancers. We also know that a buoyant housing market drives other sectors so there’s real potential for them to act as a catalyst for wider economic growth. That is, of course, an exciting and much needed prospect in the current climate.

I also think they will potentially help to make transactions smoother as a no deposit requirement will mean less negotiations and associated legal issues. This would, I suspect, be welcome news to conveyancers across the country. On a practical level, more time could be paid to the other things that all too often slow down a transaction and act as blockers, such as title transfers and searches. No one would be against benefiting from better efficiencies.

However, when I speak to my colleagues in the conveyancing sector there are many people out there who have their reservations – some of which are more than valid. It’s interesting to note that nearly every single one is related to the impact a potential surge in transactions might have on the ability of conveyancers to cope with demand.

Firstly, many firms are struggling to recruit staff following the pandemic exodus, whilst retention remains an issue across the industry with post SDLT holiday burnout a very real issue. Heavy caseloads could also mean that conveyancers are unable to nurture trainees to their full potential which is compounded by other pressures thrown up by things like the Building Safety Act.

Established conveyancing firms build their reputations on a solid foundation of delivering outstanding client care and focusing on high levels of service. If 100% mortgages do create massive volumes then tough decisions will need to be made about turning work away if standards don’t want to be compromised. This could mean more volume conveyancers stepping in and taking on work regardless of their ability to service clients effectively. Not a bad thing on the face of it, but transaction times could quite easily go into a quick reverse, thanks to the knock-on effect that would be felt throughout the chain.

Other concerns include the risk of a nil deposit simply not being accepted by others in a chain, or that they will make deposit-related discussions in chains even more complex and time consuming than they are already, or that the spectre of negative equity will rear its ugly head again.

In conclusion, 100% mortgages could herald a buoyant period for conveyancers, but we are already a highly pressured, heavy regulated and compliant profession so we need to tread carefully and ensure that duty of care and the delivery of exceptional levels of service are never compromised.

Lorraine Stratton-Webb, Partner and Head of Property at Clough & Willis