Lenders reject 33% of customers using comparison sites

It’s always a little surprising when customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of ‘comparison’ sites and ended up with a similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print.

And according to Experian this week, lenders are rejecting 33% of customers using comparison sites as they do not meet their full lending criteria. Some 11,000 people were included in the analysis which examined eligibility inquiries made on price comparison websites and digital broker channels.  Its analysis also found that just 3.5% of people searching for a mortgage were eligible for every deal on the market.

With this in mind, a vast number of people still don’t think they can get a mortgage.  With so much negativity in the media, it is not surprising that many people think they have no options. But this couldn’t be further from the truth. There are more lenders and products available now than there has been for some time. Therefore, more options and choice for customers that may not have been eligible for a mortgage in previous times. This often does not include high street lenders though. These lenders could include a small building society located in a small village anywhere in the UK. Having access to a whole of market mortgage broker is the only way you’ll gain access to such a possibility.

The bottom line is that a mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and always seek professional advice.

Not many lenders will not look favourably on Payday Loans

We’ve seen an increase in enquiries from those who might have used a Payday loan over the last twenty four months.   I need to reiterate that these are classed as an ‘adverse entity’ with most lenders (not that some would admit it!).  However, even the lenders who accept customers with historic CCJs, defaults, or missed mortgage payments registered against them, MAY NOT accept someone who has taken out a payday loan.  So, although these may be right for a customer in certain circumstances, they will almost definitely limit the number of lenders available to you when you come to apply for or change mortgages.  Seek advice.

With this in mind, lenders will look closely at an individual’s payment profile, how many recent credit searches have been incurred by financial institutions and more. The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  If you’ve not checked your credit file before, it is well worth a review. Experian, Equifax and Noddle tend to be the main providers used in our market with some offering free initial trials and you can find links to these on the AToM website.

But don’t be put off, there are many opportunities whatever your circumstances and lenders are willing to have a conversation in order to do the right deal. These are not always high street names, so do speak to someone who has whole of market access and not just a limited panel of lenders.  Of course, rates and terms will vary depending upon the type of mortgage written. Lenders have varying degrees of risk assessment calculations and this will determine the loan to value and charging rate levels.  Finally, remember to always read the small print and understand all fees involved.  The lowest rates on offer may not always be the most cost effective over a period of time for you.

Payday Loans and Mortgages = Limited options

We get many enquiries where the customer has had historic financial issues, missed a payment or two or occasionally, not made a payment at all.  Even so, in the current climates, some specialist lenders will still look to assist, albeit at a premium cost.

However, more recently you can’t pick up a newspaper, or put on daytime TV, without seeing the ever increasing number of ‘payday’ type loans available.   They are everywhere and pretty self explanatory as to why they are being used, normally more month than money…   

But, I want to explore the consequences for those who have taken out a payday type loan (short term loan, high interest rate) and then apply for a mortgage.

Payday loans are being treated, more recently, as an ‘adverse’ entity by some lenders in the market.  Even the lenders that accept customers who have had CCJs, defaults, missed mortgage payments registered against them, MAY NOT accept someone who has taken out a payday loan.

One such lender publicised their views this week - ‘Payday loan data is one of many items included in our review and if a mortgage applicant has a current or had a recent payday loan, it is unlikely that we will consider their mortgage application.’

The credit reference agencies have also buckled under the pressure from lenders to show such information on customer credit checks.  Companies like Experian now show Payday loans as a separate entry and therefore, make it easier for any prospective lender to see any history with regards to these types of loans, before making their decision whether to lend or not.

There are always two sides to every argument - “if they can’t afford to get to the end of the month, should they be looking for a mortgage?” and “the new loan will be cheaper allowing the customer to be in a better position”.     

I’m not against payday loans, they will be right for some people in certain circumstances.  But I will strongly point out that if you do take out such a loan, you will most definitely limit the number of lenders available to you when you come to apply for any type of mortgage finance.