Is an 'agreement in principle' likely to be honoured?

cpc34

I have obtained mortgages in principle from three different banks but I will not be in a position to put an offer in on a house until July (when my deposit is released from a bond). The mortgage I need is at the upper end of the salary multiple range, so I am concerned that once I have made an offer, the banks' policies may have changed and they will be willing to lend me less than I had thought.

Does anyone have any experience of this? Is there a psychic person out there who can tell me whether banks are planning to tighten their lending criteria in the next few months?

luckyfool

The trend is towards tightening of multiples, affordability and criteria in general. Beyond that I cannot say anything.

I would however stop making mortgage applications and registering credit searches just now if you are not actually ready to put an offer on a property. Each search is going to impact on your score in future applications, and this has an impact on the maximum loan with most lenders. i.e. Woolwich lend up to 5* salary, however while this used to be pretty much across the board it now depends on how good your credit score is.

If you know what your bond will release, and you know how much you will get (ok, two big ifs possibly), what is stopping you from starting a purchase now for completion in July?

luckyfool

Likely to be honoured - depends on how long they are valid for. Varies typically from 1-3 months, however the longer the validity in my experience then more likely they are to change their mind when a full application comes in.

Also, often when criteria or multiples change, it will happen for any new applications irrespective of any existing agreements in principle. How likely a lender is to act in this way varies from lender to lender, e.g. Abbey have a habit of doing it even if a case is already with them, some other lenders are more likely to stick by the approval.

cpc34

Thanks luckyfool. I was a little concerned that it I put an offer on a property now that the process would have reached the exchange-point by, say, June and I could lose the deal because my deposit was not ready. How willing are EAs/vendors/banks to accept statements like "I want to exchange no earlier than the end of July"? I'm a first-time buyer, by the way, so the tied-up deposit is the only thing that should cause me delays at my end.

happybroker

If you make your situation clear right at the very outset then you might be ok but run the risk of being gazumped by a higher offer prior to exchange.

Check how much the penalty is for coming out of the bond early, if it's only £100 or something then you can make a decision as to wether or not you feel that is worth the money.

jc292

"however the longer the validity in my experience then more likely they are to change their mind when a full application comes in."

We had an AIP from HSBC for a 90% loan valid for 90 days. They changed their mind upon application 60 days later and only offered us 85% despite circumstances unchanged and challenging none of our facts (salary, etc.). So I agree and think "agreement" in principle is quite a misleading term.

happybroker

in the interests of "treating customers fairly" they should have some sort of pipeline facility in place for AIP's already given but unfortuntely not many do (and the staff tend to be unaware of it even if the do!)