As the cost of living crisis continues, households may be feeling squeezed, making it harder to get onto the property ladder.
A couple was left devastated after a small blip in their file meant that their mortgage application was rejected.
Having spent months carefully saving up a deposit of £8,665, Kerry Hepton and her partner Jamie Metcalfe were shocked when their mortgage application was rejected by NatWest due to a CCJ Jamie had accrued in 2017 for a missed bill for £350.
This was something neither of them had been aware of and despite Jamie quickly paying off the debt, they knew that getting a mortgage from a High Street lender was going to be extremely difficult.
The inflationary pressures are taking their toll on households, making it far harder to get on the housing ladder due to more people having a less-than-perfect credit score.
The Financial Conduct Authority reported the number of adults who missed bills or loan payments in at least three of the last six months has risen by 1.4 million to 5.6 million. The proportion of those with “blips on their record” is already rising dramatically and impacting more income brackets.
Internal data from the specialist lender Together shows this year, 14 percent of the first charge mortgages it has funded have had credit issues, with expectations this will continue to rise.
This is said to cause real challenges for all would-be homeowners trying to secure a high-street mortgage in the near future.
Among those who’ve had a mortgage application rejected, a fifth (20 percent) couldn’t secure the mortgage they needed in time so lost their dream home and 16 percent gave up on purchasing altogether.
Kerry and Jamie were keen find a quick solution that would give them options for a first proper family home, where they could raise their young son, in walking distance to the local nursery.
They came across Together who helped them secure another mortgage lender and suggested the couple consider Shared Ownership.
Ms Hepton said: “Together handled everything so quickly from the first phone call and we were delighted we could find somewhere that was so nice, shiny and new. We never realised just how much more you could get for your money with Shared Ownership.
“I’d highly recommend the Shared Ownership scheme to my friends and anyone else who is out there struggling to get on the property ladder.
“While our journey to homeownership started out a little rocky, everything was soon resolved, and it’s helped us get on the ladder that much faster!”
While the risk appetite and criteria of high street lenders continues to tighten, specialist support where people’s finances are treated on a case-by-case basis offers a solution, helping more people pursue their property plans even with a missed bill or loan payment on their record due to the cost of living.
Alan Davison, Personal Finance Distribution Director at Together, said: “With everyone’s finances under pressure and the threat of recession, our research makes clear the impact on potential mortgage borrowers of having a blip on their credit record – and the emotional toll that can bring.
“And yet people who may have missed paying a single bill, for example, could be locked out by mainstream lenders’ strict criteria, potentially deterring them from pursuing homeownership altogether.
“We found a fifth of applicants were rejected by the high street, so opted for a specialist lender instead.
“While this might not be the option for all, it does offer a route onto the property ladder as people’s missed payments are instead assessed on a case-by-case basis.
“So long as there is a plausible explanation for past payment difficulties, most specialist lenders will be able to look to provide the secured finance needed to meet the applicant’s ambitions.”
He added: “There’s a longer-term case to make mortgages fairer to all and ensure the industry is adapting to people’s changing financial circumstances as this will prevent more people from being automatically rejected for historic payment issues.”
