Don't take no for an answer from mortgage lenders
News that banks are getting tough on potential borrowers doesn't mean you won't get a mortgage.
Saturday 11 June 2011
Two-thirds of borrowers are being turned down for the best loan deals, a mortgage expert claimed this week. "We know that for some of the best headline rates available on the high street, up to two-thirds of applicants are being turned down," says Ben Thompson, managing director of the Legal & General Mortgage Club.
He's not alone in highlighting the trend. Melanie Bien, director of the independent mortgage broker Private Finance, agrees and claims that some lenders are cherry-picking the best borrowers. "Some lenders, which often top the best buy tables, seem to regularly turn down applicants.
"HSBC, for example, keeps coming up as a lender which turns down perfectly good applicants," Bien says. "We've had a lot of people coming to us who have struggled to get funding with HSBC yet they have been easy to place elsewhere, so there is nothing wrong with the applicant or the property. In HSBC's case, it is very much cherry-picking of customers."
The worst hit are first-time buyers with a deposit of just 10 per cent or less. While there are now a tempting range of deals targeted at hopeful home-owners, few will get the thumbs up from hard-to-please lenders.
A report published yesterday by the online surveyors e.surv revealed that a tightening of lending led to fewer first-time buyers clambering on to the property ladder last month.
Purchase approvals for homes under £125,000 – typical first-time buyer properties – accounted for only 23 per cent of all approvals in May, compared to 27 per cent in April, and below the 24 per cent average for 2010.
Meanwhile Skipton building society recently reported that it was rejecting three out of four applicants for its 95 per cent loan-to-value deal, which illustrates how hard it can be to borrow.
The high-street banks point out that they are in the business of lending and try not to turn down applications. "We accept around eight in 10 of all customers who apply for a mortgage with the bank and the growth of our mortgage business backs this up," says Martin van der Heijden, head of lending at HSBC.
He rejects charges that HSBC cherry-picks customers. However, he says that, along with other mainstream high-street lenders, the bank has been focusing on existing customers rather than offering deals that may draw in new borrowers.
"Lenders have realised that holding the ongoing relationship with their customer is more important than just making another sale," says Van der Heijden. "We've taken a lead in offering exclusive and preferential mortgage deals to existing customers which allows us to maintain competitive mortgage pricing sustainably. The more business customers do with us, the better the price or interest rate we can offer them."
So if you're not already a customer of one of the big banks, what chances do you have of being accepted for one of the best deals, rather than having to pay through the nose for your home loan?
In fact you'll probably be better off not applying for the best deals but spending the time to find a loan that you can afford and that you are likely to be granted, say experts.
Part of the problem is to do with expectations. Research published today by the L&G Mortgage Club, a broker network, shows that there's a shortfall between borrower expectations and what is actually available in the mortgage market.
According to the research, a third of potential borrowers would be able to put down a deposit of only 10 per cent or less on a new mortgage if they were to apply over the next year. But their savings would give them access to only 17 per cent of current best buy loans.
For the one in five potential borrowers with 5 per cent or less for a deposit, the position is even more dire: they have only 2 per cent of the market to choose from.
"Most borrowers will be left disappointed with the number of products available to them on the high street," points out Ben Thompson. But it's not just disappointment. Making unsuccessful applications could actually damage your credit score.
"Lenders prefer to choose the borrowers with the highest deposits, incomes and credit scores," Thompson points out. "A typical applicant applying for a best rate product, which our research shows most will do, runs the risk of a refusal and damage to their credit record."
How can you find out which type of deal is best for you? Thompson suggests – as you'd expect – taking independent advice from a mortgage broker about the most suitable products available.
That's not a bad idea. A good adviser will guide you towards lenders more likely to be sympathetic to your own circumstances, particularly if you are self-employed, require interest-only borrowing or rely on bonuses for a large part of your income.
But there are also things you can do for yourself to vastly improve the chances of being approved for one of the better deals.
"Borrowers can help themselves by pulling together as big a deposit as possible," advises Melanie Bien. "Ensure your credit record is correct and have any mistakes changed before you apply for a mortgage.
"If you had credit problems in the past which have been rectified add a note explaining why you got into difficulty in the first instance and how you have come back from this, demonstrating that you are now a good risk."
It is actually a good idea to take out a credit card before applying for a mortgage. If you use it and pay it off each month it demonstrates to a lender that you can be trusted to pay your bills on time. And crucially, it can help build up your credit history, and improve your chances of mortgage acceptance.
"Get your name on the electoral roll so that your address history can be proven," Bien adds.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Is this bridge haunted by the ghost of nu rave?
- 3 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station