Rejections For Mortgage Applications Rise
Consumers are evermore struggling to successfully apply for home loans, new figures reveal.
In research conducted by MoneyExpert, over 738,000 applicants have been rejected by mortgage firms over the last six months as loan lenders tighten their borrowing criteria. As a result, turned down applications for such loans have risen by some 60 per cent from the 463,000 noted in the six-month period leading up to March. Meanwhile, research from the company also showed that young people have been affected the most by mortgage refusals. Over the last six months, some 382,000 consumers between the ages of 25 and 34 have been turned down for a loan, a total of four per cent of all those within the age bracket.
The financial services firm also reported that the five interest rate rises actioned by the Bank of England since August 2006 have placed additional financial strain on existing homeowners. With the base rate now standing at 5.75 per cent, those on a typical 150,000 pounds variable-rate mortgage have seen some 1,320 pounds added on to their annual repayments - a figure which could well impinge upon their ability to make payments on loans and other demands on their spending.
Commenting on the study, Sean Gardner, chief executive of MoneyExpert, said: “Life is tough at the moment if you’re applying for a mortgage. The financial environment is far more stringent than in the summer of last year and people need to be prepared for rejection. This time last year house prices were ten per cent cheaper - and the year before that they were 20 per cent cheaper - so it’s no surprise that the Council of Mortgage Lenders has suggested the number of first-time buyers on the market is dwindling.”
“But with so many applications being rejected it’s unlikely that only first-time buyers are being affected. Anyone looking to remortgage should apply with caution and take professional advice if they’re unsure - too many failed applications could affect your credit rating,” the chief executive added. In addition, Mr Gardner asserted that as loan lenders - “quite reasonably” - are looking to avoid the risk of issuing credit to people who then can not afford to pay it back, “it’s up to the applicant to convince their bank that they can cope with the repayments”.
Those consumers who find that they have a damaged credit history but are confident they will be able to make repayments on future borrowing may wish to consider taking out bad credit loans. Earlier this year, Simon Beames, mortgage adviser for the Independent Mortgage Advice Bureau, reported that mortgage lenders should do more to protect borrowers who are struggling to make repayments. He added that lenders could be “more flexible” and provide more advice on managing finances for those who have taken out a bad credit loan as consumers struggle more to meet payment demands on mortgages. The adviser also suggested that mortgage providers should be more responsible when issuing out loans to prospective homeowners.
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