Two thirds of first-time buyers rejected for a mortgage post-Covid

Nearly half (45%) of prospective first-time buyers say they were rejected for a mortgage once, and a further 20% say they were rejected for a mortgage more than once.

The main reason for a rejected mortgage application was that the prospective first-time buyer has poor credit history (21%), followed by an administrative error (21%) and not having a large enough deposit (20%).

Half of prospective first-time buyers (49%) experienced disruption to their employment since the pandemic began, increasing fears of credit issues and difficulty securing a mortgage.

Over a third (35%) were put on furlough but are back working now, one in ten (9%) are still on furlough, and 5% have either lost income or been made redundant since the pandemic began.

Future financial stability remains an ongoing stress as two in three (62%) say they’re worried about their current financial situation.

Over a quarter (26%) of prospective first-time buyers say credit history is a big concern, with two in five (36%) looking to actively improve their credit score to increase their chances of securing a mortgage. One in five (19%) now worry that their credit rating has gotten worse since the Covid-19 outbreak.

Credit issues prospective first-time buyers have experienced are wide ranging with the main barriers affecting applying for a mortgage include having an overdraft (29%), student loans (24%), missed bill payments (21%) and a gap in employment (21%). There is also a noteworthy proportion that have more significant credit issues with one in nine having taken out a payday loan (13%), 7% having a County Court Judgement, and 6% having a bankruptcy in their past.

Jon Cooper, head of mortgage distribution at Aldermore, said: “It’s easy to see from the research why many first-time buyers can feel disheartened by the challenges when looking for their first home. They shouldn’t despair though as there are many options open to them. Specialist lenders, like Aldermore, are opening up the market to those with complicated income streams or past credit issues ensuring that no borrower, whatever their background, feels excluded from the opportunity of getting on the housing ladder."