Can a lender withdraw a mortgage offer?
Our conveyancers are often asked whether a mortgage lender can withdraw a mortgage offer.
A mortgage is obtained by making arrangements with a lender through a bank or a specialist mortgage advisor.
There are independent mortgage advisors who work without any ties to any particular company or mortgage advisors who work with estate agents or a bank. If you need a mortgage to fund your purchase you should choose your mortgage advisor yourself and check what their fees are for providing the service.
After you find an advisor and a lender has made an offer there are some circumstances under which it can be withdrawn.
During Covid and in the period following it, the financial markets were quite volatile. Interest rates rose rapidly and lenders had to evaluate their lending when too low an interest rate had been applied, which resulted in withdrawal of some mortgage offers.
Borrowers were also less stable and their personal circumstances were open to change, for instance many firms went out of business and employees lost their jobs that affected income and debt levels.
In June 2024, despite the impending general election interest rates and the financial markets are more stable. Interest rates are approaching 2% which were what they were pre-covid/pre-Brexit.
Can a lender withdraw a mortgage offer?
Mortgage offers can still be withdrawn, even after acceptance by the borrower.
The main reasons that a mortgage can be withdrawn now are:
- Your mortgage offer has expired.
Usually, an offer is valid for six months to one year but after the expiration period if the offer has not been used it will be withdrawn and a new offer, if still required, needs to be arranged. - If there is any suspicious activity an offer can be withdrawn.
Prior to lending the funds lenders conduct lots of checks to ensure a borrower has been completely honest in their application and that they are who they say they are.
Sometimes, there are differences between bank statements and proof of income to what has been recorded in the original application and if the lender is not satisfied with the check they will make further checks but if they are not satisfied they will withdraw the offer. Applicants, therefore, need to be as accurate as possible when making their application for funding.
A lender will check that a borrower is not committing fraud and that a deposit or other funds used to purchase a property comes from a legal source. If there is dishonesty it can lead to a criminal charges for mortgage fraud.
As conveyancing solicitors, we have to make the same checks. . Solicitors have many duties under anti-money laundering laws and this is why we stringently check where all the funds in a transaction are coming from and with whom we are dealing. If we find something wrong, we have a duty to inform the lender, but will only do so with the permission of our client. If our client does not provide permission a conflict of interest is created and we must cease to act in the transaction.
- There is a change in circumstances
During a property purchase there may be a change in circumstances that affects a buyers financial situation. A change of job, redundancy, losing a job or the death of a partner, may affect affordability criteria. A lender must be informed if personal circumstances change, so they can decide if they still want to commit to the mortgage loan.
If you find yourself in these circumstances discuss the changes with your mortgage broker as they should be able to contact your lender and based on your new situation your loan may be amended rather than withdrawn.
- Credit problems
Your lender will run a credit check prior to finally agreeing the loan and if there is an unfavourable report may decide the risk of making the loan is just too big and withdraw their offer in principle.
There are many reasons why a report may be unfavourable, but sometimes it is because there has been a missed bill payment years ago that you have forgotten about, but it still remains on your record. There are several companies that can check your record and tell you what the problem is before you re-apply for a mortgage. You may also need to have your record amended or corrected.
- Issues with the property
The property bought with the help of the mortgage loan is considered to be an asset that protects the lending. In short, if a borrower cannot keep up with the repayments there is a danger that the lender will repossess the property. If the lender finds on valuation of the property that it is not worth what is being loaned the mortgage offer may be withdrawn, but more often than not the lender will adjust the amount they are prepared to loan to make the purchase, so if repayments can’t be made and the property is repossessed the amount loaned will be covered by the value of the property.
If on valuation a borrower finds that the house is not worth what it should be and has less value, the estate agent should be consulted to re-negotiate the purchase price and the mortgage advisor asked to resolve any lending issues with the lender. However, it is important at this point to be objective and consider whether the problems found on survey or valuation makes the property a good purchase or not and to withdraw from an offer to purchase if the property is not all it should be in terms of value.
If we are acting for you for a purchase of a property and you have been notified that your mortgage offer has been withdraw please get in touch with us by calling 01901 4555361 Option 2 or by emailing us at info@hannayslaw.co.uk
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