Increasing activity in the property market is leading some banks to miss settlement dates, so it’s wise to allow extra time for settlement and finance approval.
As the market heats up and more homes are sold, increased mortgage activity is leading to extended processing times for some banks. Usually, buyers and sellers allow 21 days for finance approval and another 21 days for settlement, but we’ve seen an increased number of settlements become overdue because the buyer or seller’s bank is not ready.
Particularly, we’ve seen delays from Westpac and Commonwealth Bank, although all banks are probably experiencing increased workload.
When a settlement becomes overdue, the party whose bank caused the delay is deemed responsible, and may be charged penalty interest for every day that settlement is held up past the three-day grace period.
To avoid incurring penalty interest, I suggest allowing at least 28 days for finance approval and 28 days for settlement.
It’s likely that banks will hire new staff to cope with the increased workload, but for the time being, a longer settlement time can reduce the risk of settlement delays.
Image by Joe Lanman via Flickr.