Rising cancellation rates and longer completion times are putting pressure on lender margins
The value of mortgages cancelled by UK homebuyers reached a record £8.7 billion in the first quarter of this year, driven by a year-on-year rise in cancellations, according to analysis by Novus Strategy.
Bank of England data examined by the consultancy shows cancellations rose 6.1% to 35,144 in Q1, even as mortgage approvals fell 2.7% in the final quarter of last year compared with the same period in 2024. The value of cancelled mortgages was up 12.3% from £7.7 billion in Q1 2025.
Each cancellation carries unrecoverable processing, valuation and underwriting costs typically running into thousands of pounds per case. Beyond direct operational losses, lenders must hold capital and liquidity against every outstanding offer until it either completes or lapses — meaning £8.7 billion in a single quarter represents a substantial volume of capital committed to loans that will never be advanced.
The Iran war effect
The US-Israeli military action against Iran, which began on 28 February, reversed months of progress in the mortgage market within weeks. Iran's closure of the Strait of Hormuz — through which a fifth of global oil and gas passes — drove energy prices sharply higher, pushing inflation above the Bank of England's forecasts and triggering a rapid repricing of fixed-rate products.
Swap rates rose approximately 0.6 percentage points from the start of the conflict, and a net 21% of residential mortgage products — 1,780 deals — were withdrawn from the market. Two-year fixed rates climbed from around 4.8% to approximately 5.5%, adding close to £1,000 a year to costs for a borrower with a £200,000 mortgage over 25 years.
For lenders, the volatility directly amplified cancellation risk, with borrowers more likely to switch products as rates moved or withdraw from transactions altogether, eroding pipeline predictability at precisely the moment that long completion timelines were already stretching capital commitments.
Completion timelines and pipeline risk
Lengthy completion times are adding to the problem. Data from TwentyCi shows the average time between a property being sold subject to contract and exchange reached 134 days in Q1, during which 67,489 transactions fell through following an offer — a 12.1% annual decline. The longer an offer remains in the pipeline, the greater the exposure to shifting borrower circumstances, chain collapses and rate changes that can trigger cancellation.
The consultancy argues that reducing time-to-completion, rather than time-to-offer, holds greater potential to improve margins and reduce costs for lenders. It points to developments including Smart Data, trust frameworks, upfront property information, digital identification and open data standards as accelerants of what it terms Horizontal Digital Integration — an operating model intended to enable data and decisions to move across all parties in the transaction, not solely within individual firms.
"The sheer weight of cancellations continues to inflict a lot of pain on lenders," said Claire Van der Zant (pictured right), chief executive of Novus Strategy. "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."
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