British Mortgage Rejections Soar 60%
The number of rejected mortgage applications has soared 60 per cent over the past six months, according to the price comparison service MoneyExpert.com.
It found that in the six months to the end of September, a total of 738,000 home loan applications were turned down, compared with 463,000 during the previous six months.
MoneyExpert.com said this was due to a combination of rising interest rates and mortgage providers tightening their lending criteria.
It pointed out that there have been five Bank of England rate rises since August 2006, pushing the base rate from 4.5 per cent to 5.75 per cent. This, it said, added around £1,320 to the annual repayments of a borrower with a £150,000 mortgage.
Those most likely to have their application rejected were young people, the group found.
"Life is tough at the moment if you're applying for a mortgage," said Sean Gardner, chief executive of MoneyExpert.com. "The financial environment is far more stringent than in the summer of last year, and people need to be prepared for rejection."
Brokers said they were surprised at the findings, and urged borrowers not to worry.
Katie Tucker, spokeswoman from John Charcol, said: "We are surprised at these figures, as no mortgage applicant should be turned down unless they have withheld information. This is why it is so important to use a broker who will only approach those lenders whose criteria the borrower does fit."
She urged people to be very careful about not damaging their credit score: having more than three failed mortgage applications can have a detrimental effect on credit ratings.
Ms Tucker added that while those applicants with a "very adverse credit rating" had seen their choice of home loan products halved of late, those applicants with "minor credit issues" would still be able to find a mortgage.
"Many applicants come to us thinking they are going to need a sub-prime mortgage, but we can find them a mainstream product," she said. "These applicants often have other merits, such as a large deposit or a good employment history."
James Cotton, from the Lon-don & Country broker, said that although the figures in the report struck him as "quite high", lenders certainly are tightening their criteria. "Whereas in the past, you might have slipped through even with a blip on your credit record, this blip is now more likely to stand out," he said.
He added that borrowers could no longer rely on a "generous look" from a lender, especially if they are stretching their income or only have a small deposit. "The benefit of the doubt is now with the lender. But borrowers shouldn't panic, as they are not going to get turned down outright."
Melanie Bien, from the broker Savills Private Finance, added that lenders are reducing the number of products available, raising tracker rates and reducing maximum loan-to-values. "Borrowing conditions are becoming harder, with less choice available -- and we don't expect this situation to improve in the short term," she said.