Lenders pulling out of mortgage offers

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by Kay Murchie

According to Convex Conveyancing, the online property conveyancer, at least 6,500 homebuyers who have already exchanged on properties could lose thousands of pounds as lenders try to wriggle out of mortgage offers before completion.

Convex research discovered that 10% of property deals in September encountered problems with the lender between exchange and completion. Convex says it has never experienced this problem before.

The problem has arisen since banks are tightening their lending criteria following the global credit squeeze.

Managing director of Convex, Duncan Samuel, said that lenders are asking questions that they have not heard of before. The profile of lender raising last-minute problems and the amount of problems is not a coincidence. It is obviously related to the credit squeeze and is a particular concern in the subprime market.

Mr Samuel added that once the parties have exchanged, the buyer is legally required to purchase the property or they will lose their deposit, which is likely to be over £20,000, they may also face being sued for breach of contract.

Convex are finding that although the lender does not technically withdraw the offer, they are raising queries on the day prior to completion.

Most subprime lenders have grown significantly over the last few years through aggressive lending policies funded by borrowed cash. With the cost of borrowing money on the markets rising dramatically, many have reduced their mortgage ranges and the amount of approvals.

The Building Societies Association recently said that its members had expected the problems and rather than follow banks lending policies had limited their number of mortgage approvals.