Lenders are increasingly withdrawing written mortgage offers just before exchange, leaving chains in disarray and homebuyers and sellers in serious financial difficulties, according to property recovery specialist, Property Portfolio Rescue.
The firm has reported that whilst buyers normally assume that a written mortgage offer means their finance is secured; 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. However, according to Property Portfolio Rescue, over the last few months there has been a notable rise in the number of cases where lenders have withdrawn mortgage offers with no explanation, or attributed it to something as trivial as one missed credit card payment, resulting in the sale collapsing.
Nick Hopkinson, director of Property Portfolio Rescue, has criticised banks for hiding their unwillingness to lend by launching products featuring a high number of clauses that rule out most ordinary buyers.
“I’ve heard of several instances recently of mortgage offers being withdrawn at the eleventh hour after repeated credit checks by lenders have adversely affected a buyer’s credit rating, causing them to fail the loan criteria!” He said.
Mr Hopkinson added: “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. 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.”
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