The vast majority of potential FTBs have been rejected for a mortgage
Poor credit history and not having a large enough deposit remain the biggest hurdles for potential first-time buyers trying to get a foot on the property ladder, as a new study by ‘Aldermore reveals that only five of them were able to get a mortgage on the first attempt. .
Aldermore’s new survey of 1,000 potential first-time buyers reveals that 38% of potential first-time buyers say they’ve been turned down for a mortgage once (36% in March 2020), and 43% say they’ve been rejected for a mortgage more than once. , a significant peak of only 17% in March 2020.
Credit history and deposit size main reasons for rejection
Research shows that many potential first-time buyers are now more likely to be rejected for more than one reason, rather than just one. The main reason an application for a mortgage was turned down was that the first potential buyer had a poor credit history (41%), up from 19% in March 2020. The other main reasons for potential first-time buyers were turned down for a loan include a deposit. height (39%), not being on the voters list (39%), administrative error (35%) and being self-employed or on contract (33%).
Overcome the challenges of closing a mortgage transaction
28% of potential first-time buyers say credit history is a big concern, and 39% are actively looking to improve their credit score to increase their chances of getting a mortgage. 19% are now worried that their credit rating has worsened since the Covid-19 epidemic.
The main obstacles related to credit that affect first-time buyers applying for mortgage credit are overdraft (34%), an employment deficit (31%), student loans (26%) and credit card debts. (23%). There is also a notable proportion who have greater credit problems with 23% having an account managed by collection agencies, 14% having taken out a payday loan, 12% having a judgment of the county court (CCJ) and 9% having bankruptcy in their past.
Proactively seek to improve credit profiles
Potential first-time buyers are now actively improving their credit: 51% make sure they pay their bills on time, 37% have recently registered on the electoral roll, 28% are actively repaying their debts and 24% repaying their overdrafts. Other credit score improvement initiatives include closing unused credit cards (21%), seeking debt advice (15%), and paying off a student loan (15%).
Jon Cooper, Mortgage Distribution Manager, Aldermore said: “Data shows the pandemic has added to already difficult conditions for those trying to climb the housing ladder, but first-time buyers should not despair. Being turned down for a mortgage, while it can be a deflating experience, is not an over game, as the options have widened over the past decade. The growth of specialist lenders, who through human underwriting can dig into more complex applications, has opened the door for those with complicated income streams or credit issues in their past to find a path to home ownership.
“The process of buying a home can be confusing and complicated, especially since this generation of first-time buyers is more financially diverse than ever. This can seem intimidating at times, so we recommend that you seek advice from a mortgage broker who can provide an overview of the market and offer options specific to a new buyer’s individual situation.