The journey to homeownership in the UK is becoming increasingly challenging, especially for those with credit history issues or blips. Recent research unveils the extent of this issue, highlighting the need for increased awareness and support for potential mortgage borrowers.
- A third of UK adults have experienced credit issues in the past, affecting their mortgage applications.
- Over half were aware of their credit history issues, but 14% were uncertain about mortgage approval chances.
- Younger borrowers face the most challenges, with 45% of 18–34-year-olds impacted.
- Together’s data reveals a 66% increase in middle-class borrowers with adverse credit since 2019.
- 24% are reconsidering their property plans due to credit issues and economic factors.
The Credit Challenge in the UK
A significant 30% of UK adults have encountered a credit setback at some point, be it from missed utility bills, rent, credit card payments, or even just being in an overdraft.
These seemingly minor blips can pose substantial hurdles when trying to secure a mortgage from high street lenders.
Awareness Gap in Mortgage Applications
As interest rates have increased, the property market may be struggling but many individuals are sill looking to buy a house and exploring their mortgage options, with some finding fixed rate mortgages appealing.
Interestingly, while 51% of these individuals were conscious of their credit history issues when applying for a mortgage, a concerning 14% were in the dark about their chances of approval.
This lack of awareness is especially pronounced among younger borrowers. A staggering 45% of those aged 18–34, 35% of those between 35–54, and 16% of those aged 55 and above face challenges when applying for a high street mortgage.
This underscores the pressing need for better education and awareness about credit scores and their influence on mortgage applications.
Table: Impact by Age Group of Credit History Issues
|55 and older
The Widening Credit Issue
This credit challenge isn’t limited to a particular demographic.
Together’s internal data paints a concerning picture, showing a 66% surge in middle-class borrowers with adverse credit histories taking out first charge mortgages since 2019, compared to 2022. In the current year alone, 14% of the first charge mortgages funded by Together were to individuals with credit history issues.
With the rising cost of living, this trend is expected to persist.
Repercussions of Credit History Issues on Future Property Plans
Credit challenges don’t just impact immediate mortgage applications.
They have long-term implications too. About 24% of individuals are now re-evaluating their future property and mortgage aspirations, influenced by the recent upticks in interest rates and inflation.
Your credit score can affect your life in many ways. That’s why it’s important to make sure your credit score is as high as possible and if need be work hard to improve it.
The Need for Better Mortgage Application Support
The data further reveals that 64% of those lacking confidence in meeting their mortgage repayments this year had a prior credit issue.
This is in stark contrast to the 32% who had no such blips. This disparity underscores the urgent requirement for enhanced guidance and support during the mortgage application process.
Alan Davison, Personal Finance Distribution Director at Together, commented: “Would-be homeowners across the UK are being locked out of the mainstream mortgage market, simply because they have minor adverse credit of a few hundred pounds.
“Banks and other high street lenders often stick rigidly to strict criteria and automated processes when deciding whether to approve a mortgage application, and credit blips – even if they’re historical and have been caused by a debt that has been paid off – can easily lead to rejection.
“With more borrowers likely to accrue blips in the current climate, it’s important to remember there are still specialist lenders out there who will still consider blips or CCJs on applications, so long as a clear repayment plan has been set up.
“At Together, we recognise the need for lenders who are agile enough to meet the needs of an increasingly specialised market.”
The path to securing a mortgage in the UK is fraught with challenges, especially for those with credit history issues.
As the economic landscape continues to shift, it’s crucial for potential borrowers to be well-informed and seek the necessary support to navigate the complexities of mortgage applications.