Many lenders – including HSBC from December 2021 – take concentration risk into account when deciding whether or not to lend against a property. This allows them to limit the number of mortgages they offer in one area, street or building, such as a block of flats or a new build 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:
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, we’ll show you the reasons why. It’s important to remember – it’s only because of our internal concentration risk policy, we could give you a mortgage on a different property.
If your heart is set on that new home, you may find that a different lender is able to offer a mortgage on your property.