Can a mortgage offer be withdrawn and how long does an offer last for?

With mortgage deals being temporarily paused for new customers, can a mortgage offer be withdrawn if you have previously applied or been accepted?

A number of banks have withdrawn deals for new customers over concerns that the falling value of the British pound against the US dollar will force the Bank of England to raise interest rates again. A rise in interest rates will mean many existing homeowners could be paying more for their current mortgage each year, while first-time buyers could find that they fail affordability tests. 

The value of the pound dropped after Chancellor Kwasi Kwarteng’s mini budget on 23 September, where he announced a number of tax cuts. In response to the value of the pound falling, the Bank of England said it wouldn’t hesitate to hike interest rates. Experts think interest rates could hit 5.8% by April next year, compared to the current level of 2.25%. 

This news comes just as stamp duty cuts come into effect which should make it cheaper for people to get on to, and move up, the property ladder.

A looming change in interest rates means there is uncertainty around the cost of borrowing, which has led to banks and building societies temporarily removing mortgage deals for new customers.

Go.Compare's mortgage spokesperson Matthew Sanders, said:  “We have seen a huge increase in demand for our mortgage comparison service as customers try to make sense of what the rate increases mean for them, and secure deals to hedge against further rate increases. We have also seen a number of deals being withdrawn from the market as lenders try to take stock of their own position in the market. However, many providers are insisting the product withdrawals are temporary and deals will return."

Can a mortgage offer be withdrawn? 

Technically,  a mortgage offer can be withdrawn by a lender at any time, up until the point you complete on your house purchase. But it’s rare. Any reasons for an offer being withdrawn will be based on the conditions set out in your offer letter.  

 These conditions could include: 

• If there is  a change in circumstances that mean you can no longer afford to repay the amount you are borrowing 
• If you failed further credit checks 
• If there are 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 hasn’t changed because of the current turmoil around interest rates and the value of the pound. 

Go.Compare's money expert Matthew Sanders said: “For those who have a mortgage or an agreement in principle for a new mortgage - it's worth noting that a lender can withdraw this for a variety of reasons at any time up to completion, but this is unlikely. 

"The vast majority of deals will be honoured providing affordability, credit checks and other criteria are met and your circumstances do not change from your application to completion date. ”

Kalpana Fitzpatrick, Editor of our sister website The Money Edit, agreed: “If you have an offer on the table, it is unlikely to be pulled. Many lenders are pulling the deals for new business until they work out pricing that works for them and are expected to come back with new products (though they are likely to be more expensive). 

“However, it is worth noting that although a mortgage offer is a promise, it can be pulled at any point until a transaction is completed - but this is only likely to happen if a property price has changed dramatically or if an applicant’s circumstances have changed.”

Most banks and building societies who have halted their mortgage deals have halted them for new customers only and any applications already submitted will continue as normal. Yorkshire Building Society, Virgin Money and Skipton Building Society have all confirmed that any applications already submitted will be processed as usual. 

If you are unsure about the status of your application, the next course of action or are worried that you won’t be able to afford it if interest rates go up, speak to your lender or mortgage broker. 

Which lenders have withdrawn mortgage deals for new customers?

• HSBC UK has taken residential and buy-to-let mortgages off sale to new customers 
• The Post Office has also temporarily withdrawn residential and buy-to-let mortgages 
• Yorkshire Building Society is withdrawing deals for new customers 
• Nationwide is increasing interest rates on its two, three, five and 10-year fixed mortgages
• Skipton Building Society is also halting deals for new customers 
• Virgin Money has also put a pause on deals for new customers 
• Halifax is removing mortgage products that come with a fee  
• Atom bank has also temporarily withdrawn its mortgage range.  

All banks and building societies who have withdrawn offers for new customers say it is a temporary measure and deals are expected to return once there is more clarity around how interest rates will change. 

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 applied for. It means that your lender believes 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 any conditions of the mortgage, including what interest rate you will pay, how much your repayments will be, any mortgage fees you might also have to pay, as well as any fees you might face if you pay off your mortgage early. 

Mortgage offers normally last between three and six months, but this will depend on your lender. Some lenders start the time period on when the application was made, while others will base it on the date the offer was issued. 

It should be clearly stated on your offer letter how long the offer is valid for.  

What will happen 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 kind of mortgage you have. If you have a fixed rate mortgage, where for a set amount of time, usually two, three, five or ten years, the amount you repay is the same every month and will remain that way until the end of your fixed term, where you can either move to another fixed term deal or move onto a variable rate. 

If your fixed rate deal is due to come to an end soon, it is highly likely that any fixed-rate deal you move 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 it’s likely your repayments will go up. 

Around a million people are on variable rate mortgages known as tracker mortgages. These tracker mortgages follow the base rate which is set by the Bank of England. So when the base rate goes up, so does the interest you pay on your mortgage. 

Lenders should give you 30 days notice before they change your repayments. 

If you are worried that you won’t be able to afford rising repayments, speak to your lender who will be able to offer advice based on your specific circumstances.

Matthew Sanders

Matthew Sanders is a money expert at our sister brand Go.Compare. He has more than 10 years experience across banking services to help people make sound 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.