Top of main content

What is concentration risk?

Concentration risk can occur if a lender approves mortgages on too many homes in the same place, raising the possibility of financial losses.

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?

Why do mortgage lenders consider concentration risk?

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. 

What does concentration risk mean for your mortgage application?

The impact of concentration risk on your mortgage application will depend on the:

  • Location of the property you want to buy
  • Number of properties in that particular area already mortgaged by HSBC UK

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.