Almost half of prospective buyers knocked back since new mortgage rules took effect

3rd June 2015


Almost half  of those who planned to buy a property since the introduction of new mortgage affordability rules last year have failed to do so.

The findings by Experian, the credit reference agency, indicate that continued confusion means that 45% of people have been disappointed since the introduction of the new rules through the Mortgage Market Review (MMR).

A quarter claim that the MMR has impacted their ability to buy a property, while a further third (37%) report that the changes have made them feel less in control of securing a mortgage.

The research went on to reveal that among those who were unable to buy since the introduction of the MMR, many still appear to be overlooking the basics in financially preparing to apply for a mortgage. Almost half (46%) have never checked their credit report, meaning they have no indication of how a lender might view their ability to repay money.

James Jones, head of consumer affairs at Experian, says: “Preparation is the key to successfully navigating the mortgage market post-MMR. Understanding the affordability rules and how a lender makes their decision is the key to success. But it can take time to build a positive credit history and a solid track record of positive money management, so it’s important you start preparing as soon as you make the decision to buy.”

In a separate study conducted by Experian in April 2014, just 44% of those surveyed were aware that the MMR would mean that lenders would be more careful about ensuring mortgage applicants could afford their repayments. And one year on, it appears that this “Mortgage Muddle” is continuing to affect many.

Of 1,500 respondents who either bought or planned to buy a property in the last year 62% were not aware that lenders may require bigger deposits (23% believe they could apply for mortgages with smaller deposits than before).

Meanwhile, 37% didn’t recognise that lenders would now be more careful  about whether they could afford repayments and 15% mistakenly believe that lenders have now relaxed their lending criteria as a result of the MMR.

In addition, of those who were unable to buy in the last year, 13% do not know how much money they have left over at the end of the month, 18% don’t even know what monthly repayments they can afford.

There was a lack of awareness about the size of down payment needed as 14% did not have a big enough deposit for the property they wanted and 12% were unable to secure the size of mortgage they needed.

Worryingly, 11% of those who were unsuccessful did not know why or haven’t asked their lender, leaving them at a significant disadvantage when it comes to improving their chances of being accepted in the future.

Tips for a successful mortgage application

Know what you have to spend: Consider what funds you can draw together to form your deposit. The size of your deposit will often dictate how much you face in terms of interest rates and lender fees.

Do your research: Use mortgage calculators and comparison websites or speak to a mortgage adviser to find out where the best deals are and what type of mortgage will suit your circumstances. Work out what you can afford to borrow and repay, both now and if rates rise by 1%, 2% or more.

Scrutinise your spending: Scrutinising your last few months’ outgoings carefully will help you understand exactly where your money is going. Prepare now by building good habits like increasing the amount you save, clearing overdrafts and cutting back on discretionary spending to ensure you close out the month with even a small surplus..

Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances – e.g. that all of your open credit accounts are recorded and that any old accounts have been marked as “settled”. If you spot anything you believe to be inaccurate, contact the relevant credit reference agency and ask them to investigate the entry with the lender.

Room for improvement: If your credit report has areas for improvement, make a plan to get it into shape well before making your mortgage application. There are a number of steps you can take, including: ensuring you’re registered on the Electoral Roll; paying down outstanding balances to less than 50% of your limit; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment.

Don’t fall at the last hurdle: Right before you make your application, take time to do some last-minute checks. Check your credit report again to make sure nothing has changed and everything is accurate right before you apply. Check the exact way your address and other personal details appear on your credit report. Small inaccuracies could see your application turned down, so don’t overlook the details.

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