Mortgages: Stand by for rejection

The self-employed and those with poor credit histories could find it harder in future to secure a mortgage, according to research from The Mortgage Lender.

The broker found that a quarter of mortgage applications from people in these categories, though accepted just a couple of months ago, would probably be turned down today. This reflects a new mood of caution among lenders about people they define as high risk, as concerns mount over bad debts following the collapse of the sub-prime mortgage market in the US.

Some British lenders are now asking new borrowers to put down a larger deposit than has been the case in the recent past before they will advance any money on a property.

Meanwhile, advice website Motley Fool has warned that a small dip in British house prices could force thousands of first-time buyers into negative equity.

David Kuo, head of personal finance at the site, said: "Borrowers on 100 per cent mortgages need to be aware that stagnant prices may keep them shackled to their uncompetitive lender and prisoners in their own home until house prices rise again."