With so much activity in the housing market right now, with the sales pipeline being busier than it has been for many years, it is reasonable to assume many households are successfully navigating the mortgage application process.
This is positive news for prospective buyers, as it indicates an opportunity to find a suitable and affordable mortgage package.
However, the current financial and economic climate is challenging, and prospective buyers should prepare themselves to face a tough time when applying for a mortgage. Many people might have arranged a mortgage of late, but this doesn’t mean the process has become any easier.
Ready for the mortgage application process?
A recent study conducted by NerdWallet, which spoke to more than 500 mortgage holders in the UK, uncovered some interesting responses concerning mortgage applications:
- On average, respondents applied for 1.1 mortgages before their application was accepted
- 10% of respondents said a mortgage application had been rejected because they had taken a loan repayment holiday
- 9% of respondents said they didn’t receive a reason why their mortgage application was rejected
- 8% of respondents said they were refused a mortgage because of a poor credit score
The issue of applicants being refused a mortgage because of a loan repayment holiday is a concern. This matter was flagged by many people in the spring of 2020 when lenders offered mortgage holiday payments at the start of the pandemic.
There was an assurance that people taking this form of payment holiday wouldn’t be negatively affected, but the findings of this study suggest otherwise. If you have taken a mortgage payment holiday, it is best to seek guidance regarding any application you make.
John Ellmore, Operations Director of NerdWallet, spoke to the media about their study, saying; “Homeownership is widely considered to be an important milestone in the eyes of many Britons. This is certainly understandable. Not only does purchasing a property give people greater autonomy over their living space, but it also provides people with an opportunity to make generous returns on a brick-and-mortar investment. Realistically speaking, most Britons need a mortgage to make the purchase.”
He continued by saying; “For many people, obtaining one tends not to be an issue – after all, a recent survey of over 500 UK mortgage holders conducted by NerdWallet revealed that on average, respondents applied for just 1.1 mortgages before their application was accepted. More recently, however, some may have found the application process more challenging. COVID-19 and the subsequent recession have caused a great deal of economic volatility throughout the previous 12 months. As such, some mortgage lenders have tightened their criteria – making mortgage applications troublesome for individuals with a less than perfect credit score.”
It isn’t surprising that mortgage lenders are closely scrutinising applications and placing stricter tests in place. This challenge will be a concern for many applicants, but it shouldn’t mean you cannot obtain a mortgage.
However, it does mean you should prepare your finances accordingly and be realistic with your application. It is advisable to speak with a professional in this field, intending to make your application more robust before engaging your choice of lender.
Call the Money Hub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.