First-Time Buyer Mortgage Offer Withdrawn

What does it mean if an offer is withdrawn?

A mortgage offer is not just a pat on the back from a lender to say they like the look of you.

It’s a formal written document confirming they will lend you a specific amount of money on a specific property. If that mortgage offer is withdrawn, it means they will no longer allow you to buy that property with their mortgage.

It doesn’t happen very often. If a mortgage offer is withdrawn, there will be a specific reason why. A mortgage offer is much more secure than an Agreement in Principle, but the lender is still not contractually bound to complete the lending until the funds are actually released.

Essentially, a withdrawn mortgage offer means that a purchase cannot proceed any further with that lender.

There are other things that people might confuse this with. Just to be clear, a withdrawn mortgage offer is not a declined application, nor a declined Agreement in Principle. Mortgage offers can also expire. Perhaps you’ve had a mortgage offer approved, then six months elapse and the mortgage offer has expired. That’s not a withdrawn offer.

With a withdrawn mortgage offer, a lender is no longer prepared to lend money on that particular property. It’s usually that something has come to light – perhaps a credit issue, a legal issue or a specific property issue.

Why would a mortgage offer be withdrawn?

There are broadly three reasons why a mortgage offer could be withdrawn. It could be that something has changed about you financially, something is discovered about the property, or some other new information that has come to light. Essentially, there’s a reason for the lender to reassess the risk.

It’s rare, so it shouldn’t be a huge worry. If it does happen, obviously it’s devastating for a first-time buyer. Normally, it’s something to do with the applicant. Perhaps you lost your job and the lender has found out, or you’ve taken out additional credit and not disclosed that – and you now fail affordability.

Maybe a County Court Judgment, a default, an IVA or other credit issues have come to light after the mortgage offer was issued.

If it’s something to do with the property, it could be that you took a high level of survey via the lender, and they’ve seen that report and decided not to proceed. Or it could be that the solicitors uncover something – Japanese knotweed is a classic one, or maybe cladding defects, or something that arises from the Land Registry.

Sometimes fraud or misrepresentation is discovered. What a lender thought was correct is highlighted as inaccurate on other systems. Another reason can be the source of deposit. Perhaps it’s a gift from a family member who signs a letter to confirm that, but when the solicitors do their due diligence, they find the money has come via a different route. The family member is effectively a disguise.

The solicitor has a duty of care to disclose what that deposit is, where it’s coming from, and what they’ve unearthed. The vast majority of lenders don’t allow gifted deposits from outside close family, so the offer could be withdrawn.

That’s quite serious. It’s not just that lenders don’t allow that, but that you’ve tried to hide it, which is a bigger issue.

There are even rarer examples. You may remember the Liz Truss budget in 2022, which caused huge volatility in money markets and consequently mortgages. In exceptional circumstances like a financial crisis, mortgage lenders may start withdrawing offers because of volatility to the funds allocated to mortgages. There are multiple reasons why an offer can be withdrawn.

How likely is it for a mortgage offer to be withdrawn?

It’s very, very unlikely. Once a mortgage offer has been issued and it’s been underwritten, it’s very uncommon.

Most mortgage declines happen much earlier in the process: at application stage, if something wasn’t declared or there’s an issue with the property, or at Decision in Principle stage, right at the start of the journey.

By the time a lender has fully assessed your case, done the valuation and issued a formal mortgage offer, they have done a lot of work to get comfortable with your circumstances and the property.

It’s unlikely and very uncommon – and whether it happens to you is largely within your own control. In our experience, most declines happen at Agreement in Principle stage – which is why it’s vitally important to get an Agreement in Principle and declare everything upfront.

Once that Agreement is approved, unless there’s something wrong with the property, you should go through to offer. At that point you should be fine – unless you do something crazy like taking out a new £20,000 car loan or spending heavily on credit cards. Opening bank accounts can sometimes be an issue, but adverse credit has an even bigger impact.

If you don’t pay a parking ticket and then get a CCJ, that’s going to cause problems. So once your mortgage application has been submitted, don’t do anything to change your financial position until the completion of your purchase.

At what stage in the process can a mortgage be withdrawn?

Technically, a lender can withdraw a mortgage offer at any point right up until the money is released on completion day. It’s normally before the exchange of contracts, because at that point a solicitor is requesting funds to be drawn down.

Most people aren’t aware of this, but lenders do multiple credit checks. At Agreement in Principle stage it’s typically a soft check. At full application there’s a hard check. When they issue the offer they check again, and then before they release funds they do another credit check to see if you’ve taken out additional credit or had anything negative added to your file.

If it’s withdrawn at the point when the funds are released, it can be quite dangerous. Once you’ve exchanged contracts to buy a property, you’re legally obliged to complete. You’re putting your deposit at risk and could be taken to court if you can’t go through with the transaction.

This is why it’s so important not to change anything between mortgage offer and completion. Once you exchange contracts, if the lender withdraws the offer, you’re in a very sticky situation with potential legal costs and losing a lot of cash.

It’s impossible to know what your credit file is doing on a day-to-day basis, but if an offer is withdrawn, it will be when you’re exchanging contracts, after that final check before they release those funds.

The next most common point in the process for an offer to be withdrawn is when the solicitors are doing their due diligence. They may highlight an issue with the property legally. Maybe a road has not been adopted or there are issues with planning permissions, drainage or sewerage. There could be something around the title deeds.

That would happen earlier on, in which case you’re not really in any danger. It’s a good reason to get ahead with the legal process. Ultimately a lender can withdraw a mortgage offer at any point up until they release the funds.

Can a house offer be withdrawn after acceptance?

It’s important to distinguish a house offer from a mortgage offer. When you’ve made an offer on a house and you’re proceeding with that purchase, a seller can withdraw at any point up until exchange of contracts.

In England, Wales and Northern Ireland, you’re not committed to the purchase of that property until you exchange contracts – although there’s a different system in Scotland.

Outside Scotland, once your mortgage offer is issued, the seller can still decide not to sell the property. You could also be gazumped, where someone else comes in offering a higher price on that house and the seller chooses to proceed with them instead.

Nothing’s legally binding until you exchange contracts. So an offer can be withdrawn on a house, but that’s separate from the mortgage.