Many lenders, including HSBC, take concentration risk into account when deciding whether to lend against a property. It allows them to limit the number of mortgages they offer in one area, street, or building, such as a block of flats or a newly built development.
But what does it mean for your mortgage application?
Concentration risk is something lenders look at internally. It helps reduce the risk of financial losses as a result of lending large amounts of money in one place.
For example, let’s say the majority of flats in a block held mortgages with HSBC. If something were to happen in that area, which impacted house prices or the ability of multiple borrowers to repay their mortgages – it could result in a substantial loss of money for us, the lender.
The impact of concentration risk on your mortgage application will depend on the:
Unfortunately, we may be unable to offer you a mortgage on the property if we consider it to carry a high concentration risk. This is due to our internal lending limits and not because of you.
If we reject your application, usually following a mortgage valuation, we’ll show you the reasons why.
If your application is rejected only because of our internal concentration risk policy, we might be able to offer you a mortgage on a different property.
If your heart is set on that particular property, you may find that a different lender can offer a mortgage suitable for your needs.
