• Guest blog by Mark Harris, Chief Executive of SPF Private Clients

As interest rates and the cost of living continue to rise, some buyers are having to take stock of changed circumstances, which may mean reconsidering their budget and seeking to renegotiate on price. But this can lead to unintended consequences and buyers could lose out. 

Understandably, some buyers may now be feeling less confident about the future and may be tempted to renegotiate the price previously agreed with the seller. 

However, it's important to be aware that it’s not that straightforward. Your lender will need to be told about the renegotiated price and even if the amount you want to borrow remains the same, you will need a new mortgage offer. This may mean paying a higher mortgage rate than the one secured on your original offer, or, even worse, the lender may reduce how much it is prepared to lend if its affordability criteria has changed since you made the application.

The lender will automatically refer back to the valuer for confirmation that they are happy with the change in price. This may result in a new valuation. The mortgage offer will also be referred back to the original mortgage underwriter who will review the case and potentially re-underwrite the mortgage based on new criteria.

This is particularly relevant for those borrowers who rely on any element of variable income such as overtime, commissions or bonuses, as not all lenders will take all of this into account when deciding how much you can borrow.

So, if you’ve found the home you’re looking for and you’re relying on a mortgage to buy it, it’s important to think carefully and make sure that potential gain outweighs the risk.

It’s also worth considering your time horizons. Most buyers currently active in the prime market are taking a long-term view, with fewer than 10 per cent stating an intention to hold a property for less than five years, according to a survey of 1,500 Savills buyers and sellers in the week to December 4.  A clear majority (60 per cent) plan to stay in their new home for more than 10 years.

While single digit price falls are expected across all prime regional markets in 2023, according to the latest Savills forecasts, compound price growth ranging from 14.1 per cent in outer prime London to 19.2 per cent in the Midlands and North of England is projected across the 2024-2027 period.

By renegotiating, there is also a significant risk that your original mortgage offer will be dramatically altered or even withdrawn. This may mean you can no longer borrow enough even to cover the new, lower price. It is worth noting that bigger ticket transactions, where the lender is likely to be a private bank, are less likely to be affected as the whole process is more personalised.

This is all part of a new lending environment in which banks are applying more scrutiny to applications than in the past and increasingly are requesting additional supporting documents.

With turnaround times taking longer than usual, getting these submissions right first time should allow the lender to process the application in one go. This will reduce the potential need for more information and further delay. 

More than ever before a whole-of-market broker, who also has access to the private banks if you require a large loan, will be very useful indeed.

Further information

Contact SPF Private Clients (SPF) for mortgage advice or view properties for sale