First-time buyers across the UK are struggling to secure a mortgage as the conditions created by the COVID-19 pandemic continue to cause issues.
According to research by Aldermore bank, prospective first-time buyers are currently experiencing “significant levels of mortgage rejection”.
Aldermore’s latest First-Time Buyer Index, a survey of 2,015 prospective first-time buyers, found that only a third (35%) that are looking to buy their first home were able to get a mortgage on the first attempt. This figure was considerably down from almost half (48%) that were able to do so in the index findings from March 2020, just before the pandemic hit.
Furthermore, 45% of prospective first-time buyers revealed that they have been rejected for a mortgage once, while a further 20% said they have been rejected for a mortgage more than once.
The main reason for a rejected mortgage application was that the first-time buyer has poor credit history (21%), followed by administrative error (21%), and not having a large enough deposit (20%).
“It’s easy to see from the research why many first-time buyers can feel disheartened by the challenges when looking for their first home,” commented Aldermore head of mortgage distribution, Jon Cooper.
“They shouldn’t despair though as there are many options open to them. Specialist lenders are opening up the market to those with complicated income streams or past credit issues ensuring that no borrower, whatever their background, feels excluded from the opportunity of getting on the housing ladder.”
Aldermore also found that over a quarter (26%) of first-time buyers revealed credit history is a big concern, with two in five (36%) looking to actively improve their credit score to increase their chances of securing a mortgage. Around one in five (19%) now worry that their credit rating has got worse since the start of the pandemic.
According to the research, credit issues experienced by prospective first time buyers include having an overdraft (29%), student loans (24%), missed bill payments (21%) as well as a gap in employment (21%).
“I would also recommend getting help from a broker, which can be a great boost in navigating the many pitfalls and confusing processes,” Cooper added. “They provide a whole of market view and cut through the jargon to provide options specific to a new buyers’ individual circumstances.”
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