Can a mortgage offer be withdrawn after exchange of contracts?

Securing your mortgage offer may feel like the final stage of what can be a very long, drawn-out process. You supplied all your personal records, jumped through various hoops, and now you have your mortgage offer; surely nothing can get in your way.

The reality is that a mortgage lender can withdraw their mortgage offer to you at any time, right up until the day of completion, regardless of the financial implications this may cause. Now, even though this is something they can do, in reality, it is a very rare occurrence, and you normally know why they have done it.

In this article, we explain the reasons a lender can withdraw their offer, what you can do, what the potential cost implications are, and how to protect yourself from them.

When can a lender withdraw a mortgage offer?

When you applied for your mortgage offer, you did so at a date before you needed to use the money on completion. This means there is a period where things could change for both you and the mortgage lender. This is why the mortgage lender provides mortgage offers with a caveat that if any of the below occur, the mortgage offer could be withdrawn:

• There is a material change to the facts and circumstances relating to your loan application;
• There has been a material change in your circumstances since you applied for the mortgage, which is likely to have a material impact on your ability to afford the loan;
• Where we have instructed a conveyancer, they are unable to certify the title to the property in accordance with our instructions;
• There is a change to the condition, value or title to the property, or we revalue the property after the date of this offer, and such change or the revaluation has a material impact on the suitability of the property as security for the loan;
• We discover that you have intentionally provided us with false, inaccurate or incomplete information as part of your application for the loan or omitted information which we have requested from you as part of your application for the loan;
• We reasonably suspect you are involved in any criminal or fraudulent activity, or you are convicted of a serious criminal offence;
• Completion of the offer does not take place by the deadline given at the beginning of this offer; or
• We are no longer permitted to lend the money to you due to our regulator removing or restricting our permission to lend.

Source: Santander UK Plc Mortgage Offer

Why would a mortgage offer be withdrawn?

Outside of the mortgage offer expiring, which is a very frequent occurrence, the reason why a lender would withdraw their mortgage offer after exchange is fairly simple: there is a risk you may not be able to repay the mortgage, or the property isn't safe security (i.e., the valuation is lower). As we see above, there are a variety of reasons for this, and the lender's zero-risk approach means they may withdraw their offer if they have concerns about the change.

Here are a few examples of when a mortgage is withdrawn and what you can do to get a new offer:

Do mortgage lenders do final checks before completion?

Yes, they do. Your lender completes a soft check on your credit history when you initially apply to get your mortgage agreement in principle (AIP). They will then conduct a full, hard credit search before issuing the formal mortgage offer, which will temporarily affect your credit rating. You can check your credit report file with Experian, Equifax, or ClearScore and read our tips on avoiding a bad credit score.

However, the scrutiny does not stop once the formal offer is issued. Because months can pass between receiving your offer and the actual day of completion, lenders need to ensure your financial situation remains stable and low-risk before they finally release the funds.

What checks do mortgage lenders do before completion?

Lenders in the UK frequently run a final series of audits (often referred to as pre-completion checks) in the days leading up to the release of funds. These checks are designed to detect any material changes in your circumstances that could affect your ability to afford the monthly mortgage repayments.

These final checks typically include:

• Final credit file sweeps: Lenders will look for any new credit searches or active borrowing on your file. Taking out a new credit card, applying for car finance, or even buying furniture on a 'buy now, pay later' scheme before you complete can instantly flag your account and trigger an offer withdrawal.
• Employment verification: Some lenders will conduct a quiet check or request a recent payslip to verify that you are still employed by the same company, have not been made redundant, and are earning the same basic salary as when you first applied.
• Bank statement reviews: If your mortgage offer is approaching its expiry date, the lender's underwriting team may ask for your most recent bank statements to ensure you are not accumulating new, undisclosed debt or operating heavily in an overdraft.
• Property and title checks: Your conveyancing solicitor must submit a final Certificate of Title to the lender. If this highlights any last-minute legal defects, or if a final drive-by valuation shows the property has significantly degraded, the lender can halt the funds.

What if the mortgage offer is withdrawn on the day of completion?

Having a lender pull their mortgage offer on the actual day of completion is the worst-case scenario for any property buyer. While this is extremely rare, it usually occurs when the lender's final pre-completion checks uncover a severe, previously undisclosed issue. This could be a sudden job loss you failed to report, a new credit agreement (such as a car loan) taken out after exchanging contracts, or suspicions of mortgage fraud.

Because you have already exchanged contracts, you are legally bound to buy the property. If the mortgage funds do not arrive, you will fail to complete on time, triggering a severe chain reaction of legal and financial consequences.

The financial consequences of failing to complete

Unless you have the cash reserves to purchase the property outright, the seller's conveyancing solicitor will issue you with a formal 'Notice to Complete'. This legal notice typically sets a strict 10 working-day deadline to secure the funds and finalise the purchase.

During this 10-day penalty period, you will be liable for:

• Penalty interest: You must pay daily interest on the outstanding purchase price (often calculated at 4% to 5% above the Bank of England base rate, as specified in your contract).
• The seller's legal costs: You will be forced to cover the legal fees the seller incurs for having their solicitor draft and serve the Notice to Complete.
• Loss of deposit: If you cannot secure a new mortgage within the 10 working days, the seller is legally entitled to terminate the contract and keep your 10% exchange deposit.
• Further damages: The seller can also sue you for any additional financial losses they suffer, such as the costs of remarketing the property or any shortfall if they eventually sell the house to a new buyer for a lower price.

What can you do to save the purchase?

You have two immediate options: attempt to secure high-speed alternative finance (such as a bridging loan) to complete the transaction, or urgently apply for a new mortgage with a lender known for rapid turnarounds.

If you need to try and secure a new mortgage in less than ten days, call us today. We will book you an urgent consultation with our carefully selected panel of approximately 50 independent mortgage brokers across London and the South East, who can help you submit your application and seek to expedite it with your chosen mortgage company, subject to their turnaround times.