According to Berry Everitt, MD of the Chas Everitt International property group, while the new legislation is only due to come into full effect by July, banks and other lenders are already starting to implement the new checks on potential buyers.

As part of the new law, banks need to check the overall credit exposure of a future borrower before that loan can be approved.

Huge fines

"To do this, they have to source information about all and any of the borrower's current personal loans, vehicle finance agreements, HP agreements, store cards and micro loans, as well as existing home loans, from each and every other lender involved," he says.

The problem is that there is no consolidated database that prospective lenders can use to access the details of a buyer. Banks may be in the process of building one, but Everitt says this is not going to happen overnight.

"So, while we welcome the new legislation for the protection it will ultimately give borrowers, we are concerned that it is going to take much longer for the foreseeable future for banks to approve home loans — especially since they face huge fines if they do not do proper credit exposure checks."

"Disastrous" outcome

Writing in the Property Signposts newsletter, he says this is likely to negatively impact home sellers, who will soon have to wait 60 days or more — as opposed to the current 14 days — to find out whether someone who is interested in buying his or her property will be given a home loan.

This delay, which will also affect everyone else in the property sale chain, will be bad enough if the loan is then approved — but will "verge on disastrous" if the buyer is after all that time turned down for a loan and the seller has to start marketing the property all over again.

"In short, the new act threatens to throw a very large spanner into the property market works unless a way can be found — and fast — to resolve this problem."