Mortgage misconceptions see potential FTBs eliminate themselves from homeownership
Aspiring first-time buyers are potentially ruling themselves out of getting a mortgage over beliefs they will be declined because of their circumstances, a survey found.
A Lloyds study of over 1,000 prospective first-time buyers found that 37% of respondents feared getting rejected for a mortgage.
Many felt their financial circumstances would automatically make them ineligible for a mortgage, with 58% believing that having existing debt would stop them from being approved. A further 37% thought having a 20% deposit was required for a mortgage.
Two-fifths said using an overdraft would deny them a mortgage, while 38% said receiving benefits and 31% believed a recent job change would have a negative impact.
Nearly a third – 30% – said not having a perfect credit score would make them ineligible, while 24% felt being self-employed would hinder their chances of buying a home.
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Pausing life to get a mortgage
Lloyds also found that many aspiring first-time buyers were putting their lives on hold over beliefs this would stop step from getting a mortgage.
Some 53% admitted to delaying or giving up on life milestones while trying to reach homeownership, with 28% putting off travelling, 15% not buying a car, 14% not getting married and 14% not having children.
A further 64% cut back on day-to-day spending, 46% sacrificed holidays, 41% limited eating out and 39% avoided buying new clothes.
First-time buyers should not rule themselves out
Amanda Bryden, head of mortgages at Lloyds, said: “Buying your first home can feel overwhelming, especially when you’re trying to save for a deposit while balancing everyday costs and other life goals.
“Our research shows many aspiring first-time buyers believe they need to be debt free, have a perfect credit record or save a 20% deposit before they can even think about getting a mortgage.”
Bryden said, instead, mortgage decisions were based on a “much broader picture” of a person’s finances and circumstances.
She added: “In reality, mortgage decisions are based on a much broader picture of your finances and circumstances. While affordability is important, don’t rule yourself out because of misconceptions about what lenders look for.
“This isn’t something people need to navigate on their own. Speaking to a mortgage adviser or broker early on can help you understand what options are available. Many people are surprised to find they’re in a stronger position than they expected.”
