During the property boom in the 1990s property fraudsters used “back to back” transactions to carry out mortgage fraud. These transactions, carried out a very short time apart, used artificial sale and purchase prices, to defraud lender of millions of pounds.
To make sure that this never happened again, Building Societies introduced the 6 month rule. This means that lenders wont lend on a property if it has changed hands in the last 6 months. There are exceptions when people inherit and then sell properties and in some other limited circumstances.
The problem usually arises when one party buys a property – usually at a fairly modest price – and then renovates it and then tries to sell it on quickly. There is no suggestion of fraud or any form of irregularity but it is caught by the rule and any new buyers mortgage cant complete until at least 6 months after the date of the original purchase. This can cause massive problems if a property is purchased and a deposit paid at auction with a completion date of only 28 days from the auction.