HSBC rejected mortgage due to subjective reason but lending criteria passed

[bloodymortgage]

As the title says, my broker tells me I passed all tests during underwriting , including affordability which was tested first (5 weeks ago). However, at the very end the underwriter has "subjectively" rejected it citing future potential interest rate increases.

My broker tells me that I already passed the usual stress test so it's more than that and there is no good reason why I've been rejected. Even the HSBC business relationship manager is stumped and told my broker that he must have read the decision wrong! That manager has tried for 3 days to get an explanation from the underwriter but she is ignoring all internal emails on the matter.

I've now had to apply with NatWest and have that application escalated as well down the legal line now with completion in less than 6 weeks. Of course now I'm stressing that that application will fail too! (And the arsehole estate agent is now aware due to the second valuer and isn't best pleased to say the least!!).

Mortgage requested was £215k (LTV 73%). My salary is c£90k and I get annual bonus of £7.5k. No credit card debt but monthly loan repayments of £1240. Application in my name as my DH is self employed with variable income and his SA302s show nil due to carried forward tax losses.

What a bloody nightmare!

Anyone had similar happen?

😣😩😣

They are probably looking at your appetite for borrowing, for want of a better expression. Perfect credit rating or not, you ARE borrowing.

Ours:

250 pm consolidation taken at beginning of year to clear c cards, cards all paid off, 0 balance
352 pm car lease

Takehome 5750 ish

Mortgage was going to be 2248 pm (we did not buy)

I wonder if the broker got wind of the loan being for fertility, figured you are still of childbearing age and that you will want to do the same again? Which is none of their feckin business, but perhaps that is the bit they are refusing to disclose.

Not sure if this is definitely the same but -

My partner and I had an issue once when buying a separate property to rent out (this one was a flat). All going fine, we could afford the mortgage, getting ticks and thumbs up all along the way. One day we was made aware it had been rejected. Only reason it was rejected (after a lot of calling around demanding solid answers) was because one underwriter had said yes, but another considered the flat service charges too high and didn't see that as a good investment for the bank should we default and the bank would struggle to resell to make up the difference. We settled on another property and all went fine. We lost a fair amount of money during the whole process (estate agent was pissed off) but I guess they have to cover their backs. 🤷🏻‍♀️

What kind of property are you buying?

Probably not much help but we got rejected on a mortgage when we had passed everything else, no reason, tried for weeks to get an answer all we got was ‘third party Information’ - my partner then went solo with NatWest and was accepted within a few days and mortgage secured as we suspected their issue was me.

We used a broker for the first mortgage and went direct with the second knowing that if we got rejected again we would struggle to obtain another mortgage.

Months later, the broker reached out and said the rejected application had been overturned and they were happy to offer us a mortgage as it was a mistake on their paperwork. We said thanks but no thanks, we had already exchanged by this point.

Fingers crossed for you OP.

I've just remembered this was also HSBC.

Hope you get it sorted OP 🙂

I would hazard a guess that although mat leave is fine, you're coupling this with a self employed husband and maybe that feels too risky for them.

Mat leave, self employment and borrowing.

Fine by themselves but all together enough to put a lender off regardless of their lending criteria.

Why don’t you try directly with someone like Handlesbanken?

@bloodymortgage

£600 for the fertility loan....was this via the clinic as it's very high? (I feel your pain as my IVF loan still has another year to run but I used a bank loan and spread it over 5 years rather than the 2 the clinic finance offered)

I was rejected for a remortgage recently with the same lender - 50% equity but was looking for additional borrowing to pay ex husband as part of divorce settlement....I earn a bit less than you but much lower mortgage and passed affordability right up to the last check when it was declined with no reason. They are just really twitchy about high loan repayments and single incomes at the moment

Me and my husband had similar issue but with NatWest on our first house purchase they agreed in principal passed majority of checks was only when we went ahead to get mortgage they rejected us panicked as we thought we would loose house we were buying at the time as first time buyers etc Halifax saved us ended up going with them so it does happen sometimes stressful frustrating when you know you can pay the bills and mortgage and have good credit rating etc.

Second time round when selling and buying we had a broker like yourself and he was brilliant can't fault him at all.

Did you have your deposit in multiple bank accounts per chance? When we were buying for the first time (I realise you aren't FTBs) we were flagged for money laundering due to the way some banks do their statements in comparison to others and we'd moved our money around a lot over the years to benefit from better interest rates.

We had a 30% deposit (over 100k) and for one of the 10k sums of money, it was classed as arriving in one bank the day before it supposedly left the bank we'd transferred it from. This meant we were black listed for a mortgage generally (not just the one we were applying for) and until we could get evidence from the two banks about the way they produce their statements we couldn't move forward with the purchase and they wouldn't discount that one 10k and "swap" it for a "clean" one once they'd "found" it. It was so stressful as no one would talk to us about it on the phone aside from saying it had been flagged as an irregularity then left us and our broker to join the dots. Could your situation be something like that?

For the record, we were buying as a couple, both in long standing full time employment earning large salaries with no debt at all aside from a small student loan and credit card that we pay off in full each month by direct debit, so not dissimilar to you aside from returning from mat leave and buying "alone" for the purposes of the mortgage.

Our deposit is coming from the sale of our current house. We will have £80k deposit.

The underwriter explicitly stated affordability as the reason and future potential interest rate increases. But the broker advised that affordability (with stress test) was already passed during the underwriting process. This is why we are at a loss.

I had to rush that last message as baby playing up ...

Thanks to everyone for your experiences and insights.

I understand that lenders are stricter but I'd like to know exactly why it's been rejected given my previous comments. If my loans are too much, then lenders should update their affordability calculators and their AIPs to reflect what they are or aren't prepared to lend on and also all agree internally. In my case I've one underwriter saying yes and another saying no.

The new house is a detached countryside house (new build with builder's warranty).

Also, re the mat leave. Sure, I could decide to leave work in 6 months but isn't the same for the many other people with children as most people over the course of their mortgage will have one parent being off for some type of parental leave and anyone with a mortgage could just decide to go part time over the duration of their mortgage if they could afford it!

Im not being assessed on my husbands costs - and in fact my bank statements show him transferring a regular sizeable sum to my account each month (£4-5k) as he's been paying the bills whilst my pay is zero. Equally, anyone could be made redundant so whilst the employers letter may not be worth the paper it's written on, neither is anyone else's employment status.

I can't see how I'm a "flight risk" either. I can't just run off with a house. And why on earth would I abandon my mortgage payments voluntarily. I quite like having a home for my family. Im not being cheeky, just stating the reality.

That's interesting. I am in a similar situation. How did you eventually sort this out?

Could you wait 3 weeks until you are back at work and then reapply?
You need to have words with that estate agent. He sounds lazy and rude. He is working for you, remember!

If it helps at all, I sorted my mortgage earlier this year while on mat leave. With the Coventry. I really can’t see that it’s the mat leave causing the problem but just in case it is and you need to find a new lender.

Try not to panic OP. No one can come up with a decent reason because it’s bananas. I feel confident you’ll find another lender.

(Oh and happy birthday!!)

Happy birthday OP. I hope tomorrow signals the start of a better year for you.

Thank you for the well wishes 😊

I can't wait until I go back to work and reapply as the other parties want to have completed by end of July at the latest. I've already applied with NatWest now and waiting on their decision. I don't want to make a third application.

I think your decision in principle must have been a borderline pass. Then interest rates went up which tipped you over into unaffordability. Yes, some interest increases are factored in but that also increases when actual rates go up.

On top of that we had an announcement of biggest house price drop for many years. Couple that with the fact that a huge number of borrowers will be coming out of cheap fixes onto hugely more expensive deals.

It shows that lenders are getting nervous and reducing their risk positions and unfortunately you are caught at the wrong time.

Most EAs would definitely be jumping through hoops to tie up TWO sales. I would tell them if this all falls apart, you'll be remarketing your house with a different agent.
On the loan and affordability, is all the loan going on the purchase? It might help if you could say you were using some to pay one of those personal loans off.

I’m also quite senior in big 4 tax! Small world

im flummoxed. You are right - your 12 months are coming up and you have a stable position.

I doubt it’s the loan or Mat leave and you have said it’s not your husband

but the estate agent mentioned the house needing to be valued twice - so is it literally something to do with the property itself? Is it currently unmortgageable or is there a debate on it value

No, the second valuation was for the second mortgage application.

Having walked away from a purchase that an estate agent’s unconstructive behaviour derailed, which also meant they lost two sales, I think you need to be quite firm with them that you’re not in this process to be bullied, OP!

I do wonder if consolidating your debts into the mortgage amount, and therefore losing your monthly repayments, would be more acceptable to a lender, as they know then the mortgage is the only commitment you have? But I’m sure the new application will be successful. Good luck!

I suspect you might be just too young to remember the early 1990s recession but at the time HSBC had a reputation for being one of the toughest lenders out there even if you'd banked with them for years. A few years later and they were chucking 4xsalary loans at every graduate, though that didn't last long. Maybe they've gone back to being very risk averse, especially as the Bank of England doesn't seem to have finished dishing out interest rate rises for some time yet....

'It shows that lenders are getting nervous and reducing their risk positions and unfortunately you are caught at the wrong time.'

This too! Lenders have been more cautious about lending and this will only increase.

I’m a mortgage broker - lenders do not decline an application based on future interest rate rises as they stress test the maximum loan amount at a set figure that takes this into consideration. If I was the broker on your case I would be asking for a review of decision as that is the U/W being unreasonable. This seems like a strange situation. It is possible the U/W is new and made an error.

I think it could be your LTV partly because your buying a new build. They usually access them as being around 10% overvalued at build completion. Add to that the minimum further expected drops of an average of 10% nationwide ( this is the reference they made to intrest rates). Your deposit of just 80k from your sale might mean you would be too close to negative equity in the next couple of years. Particularly considering your high level of unsecured borrowing and, I assume, lack of savings if your personal borrowing is at that level. Plus your application on a single salary and young dependent. I doubt it will just be HSBC that thinks its unaffordable to be honest. Find the best independent broker you can if you decide to proceed with a further application. I would consider giving the car back first, getting that finance closed off, and making do with a banger before trying again though. Or clear the fertility loan from savings if you have any.