Buyers normally assume that a written mortgage offer means their finance is secured. But in fact, lenders are frequently making written offers and withdrawing them; which they are legally permitted to do within the small print. Prior to the credit crunch this was very rare and usually only occurred when the borrower's circumstances changed adversely after the mortgage application was submitted, increasing the risk to the lender.
Over the last few months, however, there has been a notable rise in the number of cases where lenders have withdrawn mortgage offers with no explanation, or attributed it to something as trivial as one missed credit card payment, resulting in the sale collapsing. Since March, Property Portfolio Rescue (PPR) has intervened to save over a dozen chains from collapsing, as desperate sellers urgently need to find a new buyer for their property after a mortgage offer has been withdrawn, causing their existing buyer to pull out of the sale.
Nick Hopkinson, Director of Property Portfolio Rescue, said: “Frequently lenders are raising people's hopes with mortgage offers which, as far as I can see, they never have any intention of honouring. In fact, I’ve heard of several instances recently of mortgage offers being withdrawn at the eleventh hour after repeated credit checks by lenders have adversely affected a buyer’s credit rating, causing them to fail the loan criteria!
"Banks are simply not open for business apart from to the very best customers with the lowest loan to values, but they are disguising this unwillingness to lend by launching products to the market which have so many clauses and caveats that most ordinary people would have little hope of qualifying.”
PPR is regularly coming across buyers who have succeed in securing a mortgage offer, only to be informed that it has been withdrawn as they liaise with the lender approaching exchange with no explanation given. This is after the buyer has spent significant time, emotional effort and money proceeding with the sale in good faith. This behaviour is causing major stress for sellers who are losing agreed sales as chains collapse, often several months into the process.
“Don’t believe the adverts and rate charts publicised by mortgage lenders as these are mainly a smoke screen to make it look like they are open for business,” says Nick Hopkinson. “Most banks are still in real financial trouble behind the scenes and are battling to build their reserves and reduce their bad debts as the recession worsens. The UK is effectively seeing mortgage rationing by banks as they cherry pick only the buyers with perfect credit ratings and huge deposits."
