So, why are one in three house sales collapsing?

These higher borrowing costs are driving buyers to make lower offers or to pull out of sales altogether. Coupled with the fact that house sales took longer to complete in 2022 than at any time since 2009, and you have a perfect storm for property chain collapses.

“We have seen one couple renegotiate a £31,000 price drop after their mortgage application had to be made again because the sellers took so long,” said Gary Boakes from the Salisbury-based adviser Verve Financial.

Because mortgage rates had risen since the couple‘s first application, they had been set to pay an extra £30,000 more in interest over five years: “It caused a ripple of price reductions through the chain,” Boakes said.

Conveyancing delays
During the Covid lockdowns, the government introduced a temporary stamp duty holiday, which sparked a surge of house sales. The deluge has caused huge backlogs at conveyancing firms, which they are still trying to work through. Some 21 per cent of buyers who bought with a mortgage between January and November took more than six months to buy from offer to completion, the estate agency Hamptons said. For most of the past decade, fewer than 10 per cent of house purchases took more than six months

Falling prices
Some buyers are getting cold feet after house prices fell for three months in a row from September to November, according to Halifax, Britain’s largest mortgage lender. The average house prices is now £285,579 down from £294,260 in August. It expects prices to fall another 8 per cent in 2023.

While some are wary of buying in a falling market and finding themselves in negative equity, others think that they can now haggle over the asking price just before completion — a practice known as gazundering.

Samuel Mather-Holgate from the advice firm Mather & Murray Financial, based in Swindon, said: “We are seeing a dramatic increase in would-be purchasers deciding they prefer the idea of renting this winter rather than the prospect of spending years in negative equity if they complete on a purchase price agreed some months ago.”

Mortgages expiring
The delays mean that many buyers’ mortgage offers, which normally last six months, are expiring, forcing them to re-apply for deals at higher rates. Often this means that they cannot borrow as much, or may not be able to afford the higher repayments.

Some lenders may extend mortgage offers beyond six months, but the broker Trinity Financial said that HSBC, Nationwide and Virgin Money never extend offers. Others decide on a case-by-case basis and you may need to do a new affordability assessment. Often an extension will only be granted if you have a definite completion date and then for no more than a month.

First-time buyers
The average two-year fixed-rate for someone buying with a 5 per cent deposit went from 3.46 per cent at the start of June to 6.26 per cent in December. This would cost an extra £339 a month on a £200,000 25-year mortgage — £1,233 up from £894.

The share of property sales going to first-time buyers was high for most of the year but fell to 23.9 per cent in November, according to Hamptons, the lowest since December 2021. That year had the highest number of first-time buyers since 2008, with more than 400,000 getting on to the ladder after the market stalled in the pandemic.

There were 36,120 fewer first-time buyers in the first ten months of 2022 than in the same period of 2021, according to the banking trade body UK Finance. In September the government increased the threshold at which first-time buyers have to pay stamp duty from £300,000 to £425,000, until March 2025.

But it is still much harder to be a first-time buyer because of higher rates and fewer deals. Between June and December the number of mortgage products available to those with a 5 per cent deposit fell from 347 to 127, Moneyfacts said. A government insurance scheme that underwrites mortgages for those with a 5 per cent deposit will run until the end of the year though, which should at least keep these deals in the market.

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Even if house prices drop and mortgage rates fall, the rising cost of living will still make it hard for first-time buyers. Hamptons said the average budget for a prospective buyer fell £16,540 to £284,760 between November 2021 and December 2022.

Rosie Fish from the mortgage broker Habito said: “We’ve seen many customers with 5 per cent deposits reconsider buying altogether. Those who are going ahead are increasingly looking outside their preferred areas to reduce the size of mortgage and lower their monthly payments.”

What you can do
Ask your seller to take the property off the market once your offer has been accepted to limit the risk of being gazumped by a last-minute offer.

If your mortgage offer could expire, make sure your seller and any estate agents or conveyancers know your deadline. If you think you won’t make it, ask your lender about an extension, giving a reason for the delay and a new estimated completion date.

If the buying process seems to have stalled, ask your agent and solicitor if there is anything you can do to help; be polite but firm in checking on progress. Sometimes a little pressure can help.

Jim Walker and Emma Maule

We saved for years and it could all collapse

Emma Maule and Jim Walker face a tight deadline to complete on their first home before their mortgage offer expires in the new year (George Nixon writes).

The couple, aged 24 and 25, had an offer accepted on a three-bedroom terraced house in Maidstone, Kent, for £378,500 in the autumn. They have a 5 per cent deposit of £20,000, which took them three years to save, while they lived with their parents.

Their mortgage offer is for a five-year deal at 4.7 per cent, but it expires in February and their sellers have not yet found a place to buy. If the deal runs out, they face having to get a far more expensive deal because mortgage rates took a huge leap up in September. They hope they would be able to stretch their finances to afford the higher repayments because they really don’t want to lose the house.

Maule, who is on a banking graduate scheme, said that it looks like their sellers can move in with family to avoid the deal falling through – but obviously most people do not have this option. “We are on track to complete in February, just before our mortgage offer expires, but it’s going to be tight,” she said.

It is not only rising rates that first-time buyers have to worry about. Many lenders have also stopped offering mortgages to buyers with small deposits, because they are worried those buyers may struggle with repayments in a cost of living crisis and that falling house prices could push them into negative equity.

Maule said: “We are ready for the next steps of our life — you want to get it done so you can get a cat and go on that holiday. I don’t think we would want to live at home for another year.”