What is one risk that lenders face when issuing a mortgage loan?

One significant risk that lenders encounter when issuing a mortgage loan is related to the potential inability of the borrower to repay the loan. This risk arises because the bank or lending institution is providing a large sum of money with the expectation that the borrower will make regular payments over a defined period. If the borrower faces financial difficulties due to circumstances such as job loss, health issues, or economic downturns, they may struggle to meet their repayment obligations. This can lead to default, which is a key concern for lenders, as it not only results in a loss of expected revenue from interest payments but can also necessitate costly foreclosure proceedings if the property must be repossessed.

The other options reflect scenarios that are possible but are not direct risks related to the lender's fundamental concern of borrower repayment reliability. For example, while rising interest rates can influence loan conditions and overall market dynamics, they do not directly impact a specific loan already issued. Similarly, the idea that property values will always increase is an unrealistic assumption, and while it’s true that early repayment may pose a risk of lost interest revenue, it is less critical than the concern of default and default-related losses.