Can my lender withdraw a mortgage offer?

Many clients are contacting us as they are worried whether their mortgage will be withdrawn by their lender.

Since the mini-budget announced by the Chancellor on Friday 23^rd September the financial markets have been in turmoil and the pound dropped severely against the dollar.

The mini-budget  and the effect the war in  Ukraine is having on  the financial systems has left the United Kingdom economy with a great degree of uncertainty and many of our conveyancing clients are worried what this will mean for them.

Last Friday, we received hundreds of emails in the couple of hours following the budget announcement, as our conveyancing clients wanted to know what the stamp duty changes meant for them, but as the week has gone on our clients are now worried about what will happen to their mortgage offers, and unfortunately we cannot provide advice.

If you are worried about your mortgage offer and how it will affect your transaction you must contact your mortgage advisor urgently.

The uncertainty with conveyancing transactions started once the pound started to drop. Thousands of mortgage products were withdrawn from the market by lenders like Virgin Money, Skipton Building Society, Bank of Ireland, Yorkshire Building Society and others.

We know that these actions has made clients who have received mortgage offers worry whether their offer will be withdrawn by their lender and that their transaction will fall through.

We are being asked if a mortgage lender can withdraw their offer? The short answer is, ‘yes’.

A mortgage offer is not legally binding on the lender, but in normal conditions the only reason an offer is withdrawn is because of a change of circumstances that may affect the repayment of the loan, such as a change in income for the mortgagee which affects affordability.

It seems unlikely that the larger banking institutions will pull a mortgage offer that have been made suddenly. Offers are usually valid for around six months depending on the lenders and should not be withdrawn, but in these unusual circumstances it is not impossible for an offer to be withdrawn.

It is widely predicted that the Bank of England will continue to raise its Base Rate over the course of the next 12 months with the intention of controlling inflation to the government set target of two percent. As inflation rates are currently around 8-9 percent and rising, the Bank of England has been widely predicted to push the interest rate as high as 6 percent by the New Year.

Rising interest rates will affect mortgages which are not arranged on a fixed rate basis. The  rising interest rates will mean that higher monthly mortgage repayments need to be made. This may stretch a homeowners finances and cause difficulties.

Clients should seek advice from their mortgage advisor now to ensure that the repayments arranged are still affordable and how a rising interest rate will affect the mortgage they have been offered.

With the current market instability and the assumption that interests rates will rise,  the rates at which banks can borrow money  may be affected. This may mean that a lender may review the offers they have made and replace them with new offers with higher interest rates.

If your lender informs you that their mortgage offer is withdrawn and will be  replaced with another offer with a higher interest rate,  we advise our clients to seek expert advice from your mortgage advisor as we cannot offer advice on mortgage products or assess financial viability.

Being unable to repay a mortgage may lead to repossession of a property and if you find your finances are heading in the direction and at some point in the future you will be unable to repay your mortgage,  please consider placing your property for sale and taking early advice from us as to what you owe your lender. This option sounds harsh, but is far better for you financially than having a property repossessed.

We will continue to try to support our clients during this crisis, but please be patient about responses from your conveyancer as we are receiving hundreds of queries presently.

If you need to contact us our telephone number is  : 0191 455361 and our email is info@hannayslaw.co.uk