First time buyers are more likely to be rejected for a mortgage than they were a year ago!

 A recent study by Aldermore Bank showed that first time buyers are more likely to be rejected for a mortgage than they were a year ago. Unfortunately, more than two in five said that they had been rejected more than once. This compares with fewer than one in five before the pandemic.

In the survey, the top reason for mortgage applications being rejected was due to having a poor credit history (41%) and over a quarter of prospective first-time buyers said that they were worried about their credit history with over a third currently seeking to improve their credit score. 

In our experience, an often-repeated mistake is for first time buyers with any kind of complexity and/or poor credit to seek to obtain a mortgage via their bank first and this will more often than not result in a rejected application. This can lead to despair, desperation and sometimes shame and embarrassment, but brokers like ourselves are experienced in helping such customers.

Regrettably, the survey also highlighted that more significant credit issues are becoming more prevalent too with nearly a quarter (23%) having an account handled by collection agencies, one in nine (14%) having taken out a payday loan, 12% having a County Court Judgement (CCJs) and 9% having a bankruptcy in their past.  These findings are being echoed in our day-to-day dealings with customers and it’s clear that the pandemic has impacted the finances of many, but that need not mean that they cannot obtain a mortgage.

By enlightening customers to the many options available, no matter what your circumstances, mortgage brokers can remove the supposed stigma and shame of having poor credit and help make your home ownership dreams a reality.

Mortgage borrower demands are shifting!

In recent months there has been some much-needed attention drawn to customers who have experienced some type of adverse credit. Many specialist lenders and building societies are leading the way both in terms of the education process and through some innovative and highly competitive product ranges.

There is no hiding from the fact, or should there be, that borrowing demands are shifting and many high-street lenders are struggling (or unwilling in some cases) to adapt to them. The fact is that growing levels of credit related issues are emerging. In the vast majority of cases these remain minor, but this doesn't stop concerns being raised over credit histories and consumers future ability to secure a mortgage.

Recent research from specialist lender Pepper Money suggested that the majority of people who have experienced credit problems in the last three years are worried about being declined a mortgage. Its survey found that 69% of those who are seeking a mortgage or remortgage in the next 12 months are concerned about having their application declined due to their credit history.

We have spoken to many clients who, due to their credit history, felt that they couldn’t get a mortgage or remortgage from their current lender. On the back of this, we are forming even stronger alliances with a variety of lenders to help get this message across and ensure that our staff have the knowledge and access to the types of deals which can help such borrowers to achieve their homeownership aspirations.  It's these types of fresh approaches which will enable us to assist more people with the appropriate solutions and help clients put their past credit issues behind them.

Whether it’s a CCJ, Default, IVA, payday loan, missed payments, bankruptcy or even a previous property Repossession, lenders are looking to assist clients who have had these issues.  Yes, depending on the level of adverse credit, the rate maybe slightly higher than a standard high street mortgage, but we use specialist lenders as stepping stones on the road to credit repair (obviously, all subject to terms and conditions), with the ultimate target of returning to the high street lender option as quickly as possible. 

Let’s hope that 2020 is the year that this sector of the mortgage market starts to generate headlines for the right reasons.

A large portion of the UK adult population has experienced credit problems..

The festive period is traditionally a time for giving, but for some people - especially those with a family to support - it can prove to be a difficult one to successfully manage. It is a season where we see more people, from all walks of life, seeking some form of supplementary borrowing, a factor which can generate additional monetary worries and financial stress, perhaps even leading to adverse circumstances down the line.

On a positive, more forums and sources of advice/information are readily available for people to discuss topics which may have previously been considered taboo and difficult to address. Although money matters and financial education are areas where there is certainly still room for plenty of improvement.

One recent lender issued a study to brokers on the world of adverse credit to encourage greater understanding and more open discussion around this subject matter. After all, this is an area which is not going away anytime soon. According to the lenders research, a large portion of the UK adult population has experienced some form of adverse credit. 15% of all participants surveyed reported that they had previously missed payments on credit commitments; had CCJs, defaults, secured or unsecured arrears registered on their credit file; or had entered a debt management plan (DMP) in the last three years.

The research outlined that adverse credit is most common amongst people who are the prime age to be homebuyers and remortgagers. The majority of people who experienced adverse credit in the last three years are said to be aged between 35-44 (43%). This compares to 33% who are aged between 18-34, and 23% who are 55+. It’s also important to point out that it’s not just the less affluent proportion of society who pick up adverse credit on their record. The report added that 61% of the adults who have experienced adverse credit in the last three years and are planning to buy a property in the next 12 months are associated with a higher income.

There are plenty of specialist lenders who will consider those who have had all types of credit issues, subject to terms and conditions, and rates are probably a lot lower than you would think.  As always, seek professional advice from the specialists.

Lenders have seen your scenario before. You'll be surprised how they will help!

You have a default?  A CCJ?  Missed a payment or two here and there?  Yes, the high street lenders will probably say they can’t help, but there’s plenty of others who will.

These days, competition is very strong across the mortgage market and this includes helping those who have had a credit blip or two in the past.  Some lenders may even go right up to 95% of the property value for the right customer.  And, this might be surprising, but rates start in the mid 2%s range on some products.

Don’t despair, there are lenders out there who, subject to terms and conditions, will probably look at your scenario and have seen it all before.

To make the process as smooth as possible, make sure you have all details to hand at the outset.  When was the default / CCJ, is it satisfied, why did it occur, etc?  Disclose absolutely everything upfront.

With all new mortgages, a budget planner will be required.  Make sure you know and can advise exactly how much you are spending on your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage both now, and over coming years, so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.

Finally, despite some of these amazing products being available and lenders looking to attract new business, we are seeing general processing delays across the market.  Some lenders are not taking appointments for two to three weeks, some are up to ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so heaven knows how customers are faring!  With some complex deals, these are not available directly, so speak to your local (and long established) independent and whole of market brokerage and let them take the stress away from you.

You have some adverse credit and the high street lenders have said no. What next?

So, you have a default? A CCJ?  Missed a payment or two here and there?  Yes, then the high street lenders will probably say they can’t help, but there’s plenty of others who will. 

These days, competition is very strong across the market and this includes helping those who have had a credit blip or two in the past.  Some lenders may even go right up to 90% of the property value for the right customer.  And, this might be surprising, but rates start in the early to mid 2%s range on some products.

Don’t despair, there are lenders out there who, subject to terms and conditions, will probably look at your scenario and have seen it all before. 

To make the process as smooth as possible, make sure you have all details to hand at the outset.  When was the default / CCJ, is it satisfied, why did it occur, etc?  Disclose absolutely everything upfront. 

With all new mortgages, a budget planner will be required.  Make sure you know and can advise exactly how much you are spending on your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage both now, and over coming years, so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time. 

Finally, despite some of these amazing products being available and lenders looking to attract new business, we are seeing general processing delays across the market.  Some lenders are not taking appointments for two to three weeks, some are up to ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so heaven knows how customers are faring!  With some complex deals, these are not available directly, so speak to your local (and long established) independent brokerage and let them take the stress away from you.