cant get mortgage this time

As it stands the builder is gonna make 7k out of you for nothing and a further 25k from the resale of the property so by you not buying he stands to be up 32k. I would argue that that is sweetner enough. You are right and he is simply bullying you and I would doubt very much if he would request it in writing. I wouldn't give in to him just yet because he is just trying to exploit the situation. The fact that your solicitor is leaving the decision up to you would suggest that it is a brown envelope deal and he doesn't want to be party to it. I would hold the line that you need his demand in writing.
 

danny1,

Under no circumstances should you offer these guys anything.

Your best course of action is to sit on this. It's basically legal wrangling (which I suppose is a professional form of bullying). Instruct your solicitor to sit on this also as it will cost you money if he is replying to every single mail he receives from them. Of course he should inform you of further developments, court proceedeings etc. They would have to bring you to court to get anything more out of you. Most contracts are conditional on mortgage approval anyway so it's very unlikely they can get any more money out of you. Contractually, you have acted in good faith but mortage approval was withdrawn due to rise in interest rates (and slightly because of your change in earnings which I hope you kept to yourself). I doubt a court would award them anything.

Sit on it and don't worry. If you're really worried, consider independent legal advice. You don't appear to be getting this from your current solicitor.