With mortgage offers temporarily suspended for new customers, can a mortgage offer be withdrawn if you have already applied or been accepted?
A number of banks have withdrawn deals for new customers, fearing that the fall in the value of the pound against the US dollar will force the Bank of England to raise interest rates again. A rise in interest rates (opens in a new tab) will mean that many existing homeowners could pay more for their current mortgage each year, while first-time buyers may find they fail affordability tests.
The value of the pound fell after Chancellor Kwasi Kwarteng’s mini budget on September 23, where he announced a number of tax cuts (opens in a new tab). In response to the decline in the value of the pound, the Bank of England said it would not hesitate to raise interest rates. Experts believe that interest rates could reach 5.8% by April next year, from the current level of 2.25%.
This news comes just as stamp duty reductions come into effect, which should make it cheaper for people to access the property ladder and move up the ladder.
An impending change in interest rates means there is uncertainty about the cost of borrowing, which has led banks and building societies to temporarily scrap mortgage deals for new customers.
Go.Compare Mortgage Spokesperson Matthew Sander (opens in a new tab), said: “We have seen a huge increase in demand for our mortgage comparison service as customers try to understand what rate increases mean for them and make deals to protect themselves against further increases. rate. We have also seen a number of deals taken off the market as lenders try to take stock of their own position in the market. However, many vendors insist that product withdrawals are temporary and offers will return.”
Can a loan offer be withdrawn?
Technically, a mortgage offer can be withdrawn by a lender at any time, up until the time you complete your home purchase. But it’s rare. All reasons for withdrawing an offer will be based on the terms set out in your letter of offer.
These conditions could include:
- If there is a change in circumstances that means you can no longer afford to repay the amount you are borrowing
- If you failed other credit checks
- If there are any issues with the property you are looking to buy
- If you are found to have lied on your application.
This has always been the case and has not changed due to the current turmoil around interest rates and the value of the pound.
Go.Compare (opens in a new tab)Matthew Sanders financial expert said: “For those who have a mortgage or an agreement in principle for a new mortgage – it should be noted that a lender may withdraw this for various reasons at any time until completion, but this is unlikely.
“The vast majority of offers will be honored provided affordability, credit checks and other criteria are met and your circumstances do not change between your application and the completion date.”
Kalpana Fitzpatrick (opens in a new tab), editor of our sister website The Money Edit, agreed: “If you have an offer on the table, it’s unlikely to be taken down. Many lenders cut deals for new business until they establish prices that work for them and should come back with new products (although they are likely to be more expensive).
“However, it should be noted that although a mortgage offer is a promise, it can be withdrawn at any time until a transaction is completed – but this is likely only to happen if the price of a property has changed dramatically or an applicant’s circumstances have changed.”
Most banks and building societies that have halted their mortgage transactions have only halted them for new customers and all applications already submitted will continue as normal. Yorkshire Building Society, Virgin Money and Skipton Building Society have all confirmed that all claims already submitted will be processed as usual.
If you’re unsure about the status of your application, what to do next, or are worried you won’t be able to afford it if interest rates go up, talk to your lender or broker. mortgages.
Which lenders have withdrawn mortgage offers for new customers?
- HSBC UK withdrew residential and rental mortgages to new customers
- La Poste has also temporarily withdrawn residential and rental mortgages
- The Yorkshire Building Society withdraws offers for new customers
- Nationwide raises interest rates on its two-, three-, five- and ten-year fixed mortgages
- Skipton Building Society is also suspending offers for new customers
- Virgin Money has also paused offers for new customers
- Halifax removes paid mortgage products
- Atom Bank has also temporarily withdrawn its line of mortgages.
All of the banks and building societies that have withdrawn offers for new customers say it is a temporary measure and offers should return once interest rate developments become clearer.
What is a mortgage offer and how long does a mortgage offer last?
A mortgage offer is an official document sent to you by your mortgage lender confirming that they are happy to lend you the amount you have requested. This means that your lender thinks you can afford the monthly repayments, that you will make the repayments on time each month, and that the property you are buying is suitable security for the loan.
The mortgage offer will contain all the terms of the mortgage, including the interest rate you will pay, the amount of your repayments, any mortgage fees you may also have to pay, and any fees you may be charged. faced if you pay off your mortgage. early.
Mortgage deals normally last between three and six months, but this will depend on your lender. Some lenders start the period from when the application was made, while others will base it on the date the offer was issued.
It should be clearly stated on your letter of offer how long the offer is valid for.
What if I already have a mortgage – will I have to pay more?
If you already have a mortgage, whether you will soon have to pay more will depend on the type of mortgage you have. If you have a fixed rate mortgage, where for a fixed term, usually two, three, five or ten years, the amount you pay is the same each month and will remain so until the end of your fixed term, where You can either switch to another fixed-term contract or switch to a variable rate.
If your fixed rate contract is due to end soon, chances are that any fixed rate contract you switch to will be more expensive than what you are currently paying.
However, according to UK Finance, around 2.2 million people have variable rate mortgages, where your lender can change the interest rate you pay at their discretion, so your repayments are likely to increase.
About one million people have adjustable rate mortgages called trailing mortgages. These tracker mortgages follow the base rate which is set by the Bank of England. So when the base rate goes up, the interest you pay on your mortgage also goes up.
Lenders must give you 30 days notice before changing your repayments.
If you’re worried that you won’t be able to afford increasing repayments, talk to your lender who can advise you based on your particular situation.
Matthew Sanders is a financial expert at our sister brand Go.Compare. He has over 10 years of banking experience helping people make informed decisions with their money. Matthew is also adept at helping people find the best broadband deals as well as finding the best travel insurance for their holidays.