Misconceptions about mortgage eligibility may be causing prospective first-time buyers to rule themselves out before seeking professional advice, latest research from Lloyds suggests.
Its survey of more than 1,000 aspiring homeowners found that 58% believed having existing debt would automatically prevent someone from securing a mortgage.
More than a third thought buyers needed a 20% deposit, while 40% believed using an overdraft would make an application impossible.
Concerns about rejection were also widespread, with 37% worried that a lender would turn down their application.
BUYERS MISUNDERSTAND LENDING CRITERIA
Other perceived barriers included receiving benefits, cited by 38%; recently changing jobs, at 31%; and not having a perfect credit score, at 30%.
More than a quarter believed earning below £50,000 would prevent someone from obtaining a mortgage, while 24% thought self-employed applicants could not qualify.
Being on maternity or paternity leave was considered an automatic barrier by 20%, while 13% said the same about student loan debt.
None of these circumstances necessarily prevents someone obtaining a mortgage. Lenders consider the applicant’s broader position, including income, expenditure, existing commitments, credit history and overall affordability.
Amanda Bryden, Head of Mortgages at Lloyds, says: “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.
“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.
“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.”
LIFE PLANS PUT ON HOLD
More than half of respondents had delayed or abandoned other milestones while saving for their first home.
This included travelling for 28%, buying a car for 15%, getting married for 14% and having children for 14%.
Almost two-thirds had reduced everyday spending, with holidays, eating out and clothing among the most common cutbacks.
Lloyds partnered with Gladiators personality and first-time homeowner Livi Sheldon (main picture) for the research.
She says: “A lot of people assume they need everything to be perfect before they can even think about getting a mortgage, but that’s not necessarily the case.
“Talking to experts and understanding your options can make a huge difference.”
AFFORDABILITY CHALLENGE
Ian Harris, President of NAEA Propertymark (National Association of Estate Agents), says: “The reality is that buying a first home is already challenging, with affordability, deposits and access to suitable housing all significant barriers.
“The last thing prospective buyers need is to rule themselves out because they believe having existing debt, being self-employed, using an overdraft, or not having a perfect credit score automatically means they cannot secure a mortgage.
“For first-time buyers, the research reinforces the value of seeking professional advice early from a regulated property agent and qualified mortgage adviser.
“However, we must also recognise the wider affordability challenge. Helping buyers understand their options is important, but it cannot on its own resolve the fundamental pressures facing first-time buyers, including house prices, deposit requirements and the cost of living.
“The message should be simple: don’t rule yourself out before you’ve explored your options, but make sure you understand the full costs and commitments involved in becoming a homeowner.”
LONG-TERM PLANS
James Nightingall of HomeFinder AI, adds: “Affordability is the main concern for first-time buyers but it goes far beyond mortgage availability.
“Many delay their search amid wider political and economic uncertainty including interest rates and tax regulations.
“It’s no longer about just having a deposit to get on the ladder quickly; it’s about long-term plans and being prepared and able to accommodate future rate rises or other growing expenses including the cost of living.”
