Mortgage lenders are scuppering the home ownership hopes for first-time buyers by using outdated approval criteria, based on a new report.
The specialist lender Together claims that would-be buyers are being rejected for mortgage loans because of their job types and lifestyles, rather than affordability reasons.
Here, we check out the information and provide advice on ways to get approved for a mortgage.
Reasons for mortgage rejection are ‘the new normal’
For the research, Together spoke to two,003 individuals who had didn't get a mortgage determined that 54% of applicants were rejected because of what it describes as ‘new normal’ methods for living.
Respondents told Together they had been rejected for the following reasons:
Low credit score/lack of credit history | 18% |
Low earnings | 16% |
Too much debt/too many credit applications | 13% |
Employment type (self-employed/contractor) | 12% |
Buying a non-standard property | 10% |
Small deposit | 9% |
Insufficient employment history | 3% |
Together says that several of these reasons simply reflect trends in how people live their lives in 2022, rather than the fact they can’t afford to pay back a home loan. The report claims the next:
Computer says ‘no’
The report also suggests that the automated systems commonly used by banks are to blame for rejections.
Pete Ball of Together, says: ‘There's been a paradigm shift in the united kingdom mortgage market. People’s methods for living are constantly evolving, however the mortgage marketplace is stuck previously with regards to adjusting to the changing needs of customers.
‘This really is largely because of the increasingly computerised process utilized by lenders, which automatically declines customers whose day-to-day circumstances don't fit their tick-box model.
‘As a result, more than half of mortgage applicants are rejected for reasons which are essentially becoming standard, pushing more customers further away from achieving their home dreams.’
Millennials face credit history issues
But what of buyers saving for his or her first home?
Millennials (defined within this report as applicants aged 18-34) primarily faced struggles associated with their credit ratings or existing debt, although more than a quarter asserted they were rejected because of having unsuitable employment, or simply because they were trying to buy a non-standard property.
Low credit score/lack of credit history | 31% |
Too much debt/too many credit applications | 19% |
Employment type (self-employed/contractor) | 14% |
Low earnings | 14% |
Small deposit | 13% |
Buying a non-standard property | 12% |
If you’re struggling to get a mortgage for any reason, it’s worth consulting an independent mortgage broker, who should be able to counsel you on the lenders probably to assist you.
How to get yourself mortgage ready
Together says many would-be buyers feel let down by the mortgage application process, with nearly half (49%) saying that these were either put off studying the process again, or were unsure what their options were following a rejection.
This might all sound a little disheartening, but don’t worry, as there are steps you can take to enhance your odds of obtaining a mortgage.
You could possibly get more tips in our full guide on enhancing your mortgage chances.
Five things that decelerate mortgage applications
- Submitting your tax return in the last second: if you’re self-employed, you’ll have to provide evidence of your earnings for the current year (dating back the previous October) by showing your SA302 tax calculation. You are able to only get this once you’ve submitted your tax return.
- Having no proof of accumulating your deposit: lenders won’t just want to know how much deposit you’ve got – they'll need to know in which the money’s originate from. If you’ve been gifted a deposit, you need to get instructions confirming this from whomever gave it to you.
- Making mistakes on statements: even small spelling errors on statements or payslips may cause lenders to reject them as proof of income, so check and make sure every detail.
- Changing your name after marriage: failing to provide proof of a name change can lead to lenders can not verify your identity, so inform your financial service providers of your name change well before trying to get a mortgage.
- Using scanned documents rather than originals: some lenders won’t accept scanned copies of documents or printed statements from online banking, so you may need to go to some branch personally to get your bank statements printed.