The value of mortgages not taken up by home buyers hit a record high of £8.7 billion in Q1 after a rise in cancellations year-on-year.
In a warning to lenders, mortgage cancellations were up 6.1% to 35,144 in the first quarter, according to the latest Bank of England data analysed by Novus Strategy, the transformation consultancy for the home buying and selling industry.
This was despite a 2.7% fall in the number of mortgage approvals in the final quarter of last year compared with the same quarter a year earlier. The value of cancellations between January and March was up 12.3% from £7.7 billion in Q1 2025.
Every cancelled mortgage represents a direct operational loss. Each of these cancellations in Q1 will have incurred processing, valuation and underwriting costs regularly running into thousands of pounds per case, none of which is recoverable. But the operational cost is only part of the picture. Lenders must maintain sufficient capital and liquidity against every outstanding mortgage offer until it either completes or is cancelled. With £8.7 billion of approvals not taken up in a single quarter, that is a significant volume of capital committed to loans that will never be advanced.
Long completion times compound the problem. The longer an offer sits in the pipeline, the greater the exposure to changing borrower circumstances, chain collapses and rate movements that lead to cancellation. The time between SSTC and exchange reached 134 days in Q1, according to TwentyCi, when 67,489 transactions fell through post-offer — down 12.1% annually. For lenders, every additional week in the pipeline is another week of capital tied up, underwriting assumptions ageing, and cancellation risk growing.
Mortgages are cancelled for various reasons, and volatility such as the interest rate spike we’ve seen this year due to the Iran crisis can be a major contributory factor. A borrower may have multiple mortgage offers, could switch to take advantage of falling rates or back out of a sale altogether.
Excessive completion times also increase the risk that changing circumstances cause entire chains to collapse, leading to offers expiring. Conveyancers and estate agents have always been keen to reduce time to completion. More recently, lenders have turned their attention to this metric as it has far greater potential to improve margins and lower costs than time to offer.
Best placed to achieve this is the digital transformation the industry is embarking on. Whereas parties involved in housing transactions and lending may have mastered internal digitisation, it is interoperability across all these organisations that promises to truly transform the home buying process.
This effort is accelerating thanks to innovations such as Smart Data, trust frameworks, upfront property information, digital ID and open data standards. Horizontal Digital Integration (HDI) is the operating model that brings all these components together so evidence, data and decisions move predictably across the whole journey, not just within individual firms.
Claire Van der Zant, CEO of Novus Strategy, said: “The sheer weight of cancellations continues to inflict a lot of pain on lenders.
“This is one of the most-watched metrics inside banks and building societies, and these industry-wide figures illustrate the scale of the problem but also the opportunity.
“Reducing the volume and value of cancellations is one of the easiest ways lenders can boost their bottom line over the next decade but the solution is not an inward-facing one. A revolution is unfolding in homebuying, but it’s one that requires everyone involved to take an ecosystem view, not least because the homebuying journey is being redesigned.
“It’s no longer about internal digitisation, it’s about wider transformation delivered by integrating horizontally for interoperability. We’ve got to bring speed-to-completion down and allow everyone, including businesses, to share in the benefits of a more efficient property market.”
