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Four in five first-time buyers rejected for mortgage

Written by: Shekina Tuahene
Advice from a mortgage broker could help borrowers get their mortgage application accepted first time
Four in five first-time buyers rejected for mortgage

Just 19 per cent of first-time buyers were able to get a mortgage on their first attempt in the last year, research from Aldermore suggests.

This is compared to the 48 per cent who were successful the first time round before the pandemic.

The survey of 1,000 prospective homeowners found 43 per cent of first-time buyers were rejected for a mortgage more than once. This was up from the 17 per cent who said this was the case in March last year.

The proportion of new potential buyers who were rejected once stayed stable, with 38 per cent citing so in March this year compared to 36 per cent last year.

Multiple barriers

The survey found first-time buyers were being rejected for more than one reason in many cases.

Two-fifths were turned away due to poor credit history, up from a fifth last year.

With a lack of high loan to value mortgages on the market until very recently, some 39 per cent had their applications rejected because their deposit was too low. In March last year, this hindered 19 per cent of first-time buyers.

Those who were self-employed, with irregular incomes or on a contract were rejected for a mortgage in a third of cases while a payday loan blocked 29 per cent of buyers from obtaining their first mortgage.

A lack of income was the primary reason for rejection for a quarter of respondents.

The survey also highlighted a surge in lender errors. Some 35 per cent of first-time buyers were rejected because the mortgage provider made an administrative error, compared with the 14 per cent last year.

Resolving credit issues

Some 28 per cent of prospective first-time buyers said credit history was a concern for them when getting a mortgage, while 39 per cent said they were working on improving their score.

A fifth said they worried their credit rating had worsened since the pandemic.

Having an overdraft was a barrier for 34 per cent of first-time buyers when applying for a mortgage and a gap in employment affected 31 per cent of respondents.

Student loans affected 26 per cent of first-time buyers and 23 per cent were held back by credit card debt.

Jon Cooper, head of mortgage distribution at Aldermore, encouraged first-time buyers not to worry about being rejected for a mortgage because options have increased over the past decade.

He said: “The growth of specialist lenders – who with human underwriting dig into the detail of more complicated applications – have opened the door for those with complicated income streams or credit issues in their past to find a pathway to home ownership.

“The home buying process can be confusing and complicated, especially as this generation of first-time buyer is more diverse in financial circumstances than ever before.”

He added: “It may feel daunting at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view, and provide options specific to a new buyers’ individual circumstances.”

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