Mortgages being pulled, chains failing - what’s happening?

[SofieM0]

Someone in our chain has ‘lost’ their mortgage. Trying to get a new one but we were due to exchange this week so now delayed and chain at risk of collapsing. Not sure if the MiP never materialised into an approved offer or approved offer got pulled.
This happened to another friend but they had an approved offfer and it got pulled off market.
A third friend is having difficulty getting a mortgage at all despite no issues, each time she chooses one and applies it gets pulled.
What’s going on? We all live in different parts of country too. The only thing all 3 have in common is they used a broker.
At first I didn’t believe our buyer - thought it was an excuse to pull out - but it’s been two weeks since mortgage ‘lost’ and still hasn’t pulled out of that was his plan.
Is it symptomatic of the current credit crunching times? Anyone else experiencing this?

Surely it’s down to the dramatic increase in living expenses and banks having to be more careful who they lend money to 🤷‍♀️. Not sure about your buyer though as surely once your approved they wouldn’t revoke their offer - only thing I can think is their time ran out on the offer and had to reapply.

I've read that a lot of the 'offers over m' or sealed bid type bidding wars mean that agreed sale prices are WAY over what mortgage companies will value the house at. So when the mortgage won't fund and buyers have maxed out on the offering frenzy it all goes tits up

Seen a couple of other threads or ops on mumsnet saying, applied for a mortgage. The op and the seller had agreed a price of say £280k, but the mortgage lender said house was overvalued, and would only give a mortgage for £265k. And the ops were unable to make up the £15k shortfall. Something like that.

Seems to me mortgage companies do not want to get left with houses that they think are going to devalue in price in the coming weeks and months.

If your offer expires it needs to be revalidated/reapplied for. The rate that was previously offered may no longer available (meaning repayments no longer affordable), circumstances change (reduced earnings, pregnancy, redundancy, new job), tightened affordability criteria etc.

Brokered mortgages are the vast majority so it means nothing that all 3 you're aware of went through a broker.

If this is representative of industry policy changes then its a signal there are concerns about valuations and/or affordability and ability to pay..

FWIW, I was mildly surprised that house prices continued to rise during the last couple of years and were relatively independent of employment and furlough.

I think it's the increased cost of living. What was deemed affordable 3 months ago isn't the same now. For what it's worth, the same thing was going on in 2017 but I'm not sure why (maybe because 3 bed houses in our area were shooting up 5k per month). We only got our house because two sets of FTB who offered before us were suddenly told they couldn't have the mortgage that had been agreed in principle. They weren't the only ones. I was working at a law firm at the time and the conveyancing solicitors were pulling their hair out. Not sure if it still happens now but the banks were leaving it to the conveyancers to break the news to the buyers.

I wonder if banks are also looking at future affordability - can a person/couple afford the mortgage should the rate go up by 3% for example, plus factoring a percentage rise for other amenities that have to be paid. Wages have risen, but are they going to keep rising in line with (guessed at) inflation and interest hikes? Banks are protecting against repossessions and losing money.

Thanks all - it’s kind of what I thought.
@ILoveMyMonkey a mortgage that’s been offered can still be pulled even after contracts have been exchanged. So nothing is certain until completion.

For info there’s 4 transactions in chain with 3 houses. All houses went below asking (we don’t seem to be experiencing this inflated bubble that elsewhere is and there’s plenty on the market) so it’s not a valuation issue. More likely affordability as things have changed
All 3 cases I refer to were only applied for in Feb so no issue on expiry.

After digging today the guy in our chain had the mortgage offered mid March. At least that’s what broker told him. He’s been chasing paperwork as solicitor needed him to sign the deed and that’s when they found out it had been pulled but broker hadn’t been in touch. Other options as PP said are just not affordable for him…
My friends in the other 2 cases; one had an offer revoked and other can’t get MiP as goal posts keep changing.

As I’ve repeatedly said on here in regards to how growth assets (like house prices) react to financial environment cycles, e.g. deflation, inflation and stagflation.

Inflation makes the cost of living go up, interest rates increase to protect against inflation, affordability goes down, economy slows (recession/stagflation) peoples jobs become insecure, banks remove lending to protect themselves from defaults. What will the nations 2.5m BTL landlords do when their costs go up and the market cannot price in the rent increases. Sell up whilst property prices are high. That’s where the supply will come from.

Banks have already started removing their longer term, low interest mortgages months ago. Now they are cutting lending due to defaults expected.

www.bloomberg.com/news/articles/2022-04-14/u-k-banks-plan-sharp-cut-in-mortgage-lending-boe-survey-finds

Yes, it's not very surprising. The banks have already tightened lending criteria and will continue to do so much more. Inflation is up (much higher than 7% in reality), taxes are up, pay is down, higher unemployment is expected so the banks are looking closely at affordability. House prices can be expected to fall predicting the timing isn't possible.

Good post.

In your opinion, do you think rents will go up, at least in the short term? As some home owners find they cannot keep up with mortgage payments, so move to rentals instead?

But in some instances, rent is more expensive than a mortgage

oops. wrong quote.
@Lightscribe is the person I was trying to quote

I think it very much depends on where you are in the country and what you’re looking for, rent actually is dropping by me they were up to £950 a month for anything that was half decent three bedrooms not riddled with damp that was just before Christmas. Similar houses seem to be around the £795 mark now

Firstly there were some stupid mortgage dependent offers which is are rightly being down valued. Secondly the cost of living crisis and the increasing trajectory of interest rates which really do need raising is going to choke mortgage availability.

This is the case where we are, I think (Cambridgeshire). Peak Cambridge is still selling within days, but anything outside of there is not shifting unless it’s A+. It was a really noticeable point in March - if you’d sold before that, you were fine.

I think it’s affordability and people getting cold feet if they’ve just been clobbered by a doubling utility bill. Interest rates aren’t the biggest problem for affordability, it’s household costs going through the roof.

@DazzlePaintedBattlePants exactly the same here, anything outlying just isn’t going. None of our 4 sales got any offers over asking, all well under and that was after months of being on market for all of us.

I’m wondering now if ours have got cold feet, like you said, on top of original mortgage being pulled - that’s just added to their worries. It’s been a good 2 weeks since I’ve heard anything from them or their solicitors.

We lost out on a house recently because I calculated that I wouldn't have the extra cash if the mortgage company devalued it (which was highly probable).

Rents will always be priced to the market level. Some people own properties outright so can afford to drop rents accordingly so rental income remains constant. Others will be highly leveraged so ‘need’ to return a certain income otherwise it becomes a negative yielding investment.

The danger there is the highly leveraged will be more susceptible to voids and non paying tenants in search of higher rental income. Especially when the likes of LHA doesn’t even cover their rental costs.

People lose jobs in recessions and their ability to keep up with their bills and the cost of living.

It’s the highly leveraged which will be the forced sellers, once they can go through the process of eviction (which will become increasingly back logged) to be able to sell.

So longer term rents down due to returns not beating inflation and investors selling up. People would rather get 4-5% interest rates on a safe return in the bank once they know house prices have stagnated/falling than risk 3% return on rentals with possible voids.

This has happened to us. All good to go and then bank pulled mortgage because they spotted a late payment on my credit card from 2010 (when I was a student)- underwriter wouldn't budge but gave this as a reason for withdrawing our offer. So frustrating. We're back to the drawing board with finding a lender.

That’s literal bullshit it’s no way that’s the real reason and that’s what so infuriating is it’s actually they don’t have to give a reason at all you just no longer fit with the risk criteria.

@Nothappyatwork

That’s literal bullshit it’s no way that’s the real reason and that’s what so infuriating is it’s actually they don’t have to give a reason at all you just no longer fit with the risk criteria.

Exactly. Even our broker was annoyed and said he'd never heard of such a ridiculous excuse. He thinks banks are becoming more picky at lending because they're expecting world events to really spiral which is going to impact our economy, more than they already are. We've just been pitched to another lender, hoping and praying we get good news soon...

Ps. Should've added: my husband is a contractor in a niche field so the underwriter is likely to have had some jitters about his job but THAT wasn't mentioned, just my late payment from years ago.

There's definitely something afoot. My colleague tried to port their mortgage for a move & failed the new checks, their current provider wouldn't touch them despite higher salaries & better LTV. Luckily they found a new one.