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Is the Market Flipping Mortgage-in-Principle?
The Mortgage-in-Principle model is changing. Property risks are moving upfront, making home buying faster, fairer, and less prone to last-minute surprises.
Mortgage-in-Principle: It's All on the Borrower
For decades, Mortgage-in-Principle (MiP) has focused almost entirely on the borrower. The affordability and creditworthiness of the buyer have been the main ways lenders assess risk, while the property itself has only come under scrutiny if there’s something significantly wrong, such as severe uninhabitability or uninsurable risks.
The borrower-centric approach has meant that the asset’s role in the lending decision has been largely ignored until the survey stage, despite it being the security for the loan. The system implicitly assumes properties are broadly acceptable unless proven otherwise.
A System That Falls Short for Both Buyers & Sellers
While the MiP system is designed to give buyers confidence, it often fails to serve its intended purpose. Buyers may feel reassured that they can proceed, yet they lack clarity on property-specific risks that could disrupt their purchase later.
Sellers, meanwhile, face uncertainty, as buyers with MiPs can still drop out if a lender later refuses to lend on the property or changes terms due to unexpected risk. This creates friction, last-minute surprises, and emotional and financial stress for everyone involved, resulting in wasted time and unnecessary costs across the transaction chain.
Moving Towards a Better Integrated Process
The market is beginning to recognise the need for a more integrated home buying and selling process. The recent announcement by Rightmove and Nationwide of a “global-first property lending check” is a significant step towards addressing this gap. It allows buyers to see whether a lender would be likely to approve a mortgage on a specific property before making an offer, embedding property risk assessment much earlier in the process and reducing the chance of a last-minute collapse.
This development is part of a wider industry shift. Proptech tools are now providing instant digital valuation, pre-transaction checks for flood and subsidence risks, and shared property data that help streamline the process from offer to completion. For example, LMS data indicates that using integrated property risk data can reduce the time to completion by up to 35% and cut transaction fall-through rates by as much as 43% (Source). Collectively, these developments are moving the market towards a “property-in-principle” approach, reducing transaction friction while ensuring that actual property risks are considered upfront.
Why this shift matters?
This shift is important because it redefines who and what is seen as the risk in the property market. Moving from a borrower-only perspective to include property-specific risks provides greater protection not only for lenders but also for buyers and sellers, allowing transactions to proceed with increased confidence and transparency. It enables risks to be assessed and priced into lending decisions rather than leading to automatic exclusions, shifting the conversation from risk avoidance to proactive risk management.
Currently, social and climate-related factors, such as flood risks or cladding issues, are often treated as automatic barriers to lending, leaving many homeowners unable to sell or remortgage. For example, residents in flats with unresolved cladding issues have found themselves unable to move, facing rising insurance costs and financial stress while waiting for remediation that can take years. By assessing and pricing these risks upfront, lenders can help people access new housing opportunities while maintaining stability across the housing market.
Towards Risk Inclusion, Not Exclusion
As climate and property-specific risks become more prominent, the limitations of the borrower-centric MiP system will only become clearer. Without adaptation, we risk a future where more humans become “stranded assets”, restricting market mobility and deepening social inequalities.
At SkenarioLabs, we believe in helping lenders and property professionals price risk for inclusion, not exclusion. By making property risks visible and manageable at the earliest stages of the process, we can help create a fairer, more fluid property market that protects buyers, sellers, and lenders while addressing the realities of our evolving risk landscape.
