In September, banks took the decision to suspend as many as 40% of currently available mortgage offers, responding to uncertainty in the market and rising interest rates.
This has left many people considering buying property in the lurch, or faced with taking on a significantly higher interest rate – and therefore a costlier product.
Fortunately, this shouldn’t have effected people who already had an offer and had started the process of making their purchase. But it serves as a helpful reminder that mortgage offers are exactly that: offers, which don’t become legally binding until after the point of completion.
While it should only happen rarely – usually as a last resort or under exceptional circumstances – lenders reserve the right to withdraw their offer at any point during the process, including after you have exchanged contracts, right up to the completion day. Some of the reasons this could happen include:
- Concerns about the property. This could be anything that puts the property at risk or greatly reduces the value, such as subsidence or flood risk.
- Failed credit checks. You’ll do a soft credit check when you get your agreement in principle, and then the bank will take a closer look at your finances. Red flags might include use of payday loans or outstanding debt issues.
- Changes to your circumstances, such as losing your job or dramatically increasing your outgoings.
- They have detected suspicious, potentially fraudulent activity.
- The mortgage offer has expired.
Outside of concerns around fraudulent activity, none of these issues need to spell the end to your property plans. Your circumstances may mean that you need a more specialised mortgage product, but there are plenty of these on the market, designed to tackle issues such as weak credit history or unusual property features.
What to do next
If you ever find yourself in this position, it’s a good idea to speak to a mortgage broker as they will have the best overall understanding of what your options are. A broker may be able to support you in negotiating a new offer with your existing mortgage provider or, if this isn’t possible, to find an alternative solution.
Applying for several mortgages in quick succession can affect what lenders see when they run a credit check, and make it harder to secure future financing. So it’s important to take a step back and review your options properly before rushing in to find another deal. You should also be able to get some information from your current lender about why they are withdrawing the deal. This will give you – and your broker – enough information to find a more suitable option.
If you can’t get a mortgage
Hopefully, using the information above will be enough to negotiate with your mortgage provider or find someone else willing to offer a loan. However in some extreme cases, particularly where your circumstances have changed or new information has been uncovered during the bank’s searches, this may not be possible. In that case, you may need to find a way to increase your income or build up a larger deposit before you can re-enter the housing market. While frustrating, it’s certainly not impossible, and by using the time to reassess your options you may be able to make a plan that’s more sustainable long term.