Research by Aldermore Bank has found that the main reason for first time buyers being rejected for a mortgage was due to applicants being self-employed or a contract worker.
Research done pre-lockdown in March found being self-employed was 9th most common reason for a mortgage application rejection but this has jumped to number one.
Other top reasons for first-time buyers being turned down for a mortgage:
A survey of 1,000 prospective first-time buyers revealed many are struggling to secure a mortgage and 6 in 10 said “buying a home feels unachievable at this time”.
34% of first-time buyers said, “credit history is a big concern”. The main obstacle was a gap in employment in additional to student loans, credit cards and having an overdraft.
More seriously for first time buyers:
First-time buyers are now trying to improve their credit rating, half of applicants now ensuring bills are paid on time. Over a third are actively paying off debt and one third registering onto the electoral roll.
According to the report, closing credit card, reducing overdrafts and seeking debt advice where other initiatives for improving their credit files.
The survey also revealed buyers at the start of the buying process lacked confidence with two thirds admitting finding the process was confusing.
3 in 4 first time buyers felt the whole process stressful, whilst considering the above factors, applying for a mortgage and waiting to see if it will be accepted.
It goes with the territory for us all, if you have a poor credit rating or if you are deemed a high risk for loan arrears, you are going to struggle. Imagine it was your own 'personal' money you were lendng to a stranger who was self employed and struggling during lockdown or a first time buyer, who already has not managed their money properly and is already in debt - would you lend your own money in the 50s and 100s of thousands of pounds? So why would a lender risk it?