Sixty per cent of mortgage applications have been turned down during the last six months as lenders tighten their belts and their criteria for granting loans, according to new research from MoneyExpert.com.
According to MoneyExpert’s figures, more than 738,000 home loans have been rejected since March, compared to 463,000 during the six months prior, and this is largely due to rising interest rates and tighter lending criteria in light of the sub-prime crisis in the US and its knock-on effect in the UK housing market and economy at large.
Five Bank of England base rate hikes in 12 months have amounted in a change to the base rate from 4.5 per cent to 5.75 per cent; this has taken its toll on affordability and fewer potential borrowers are now eligible for home loans, as the hikes added approximately £1,320 to the annual cost of a typical variable rate mortgage of £150,000.
Of those who had applications rejected, young applicants – those aged of 25-34 – have been the hardest hit by the stricter regulations and higher rates; four per cent of this demographic have had an application turned down.
Sean Gardner, Chief Executive of MoneyExpert.com, said: “Life is tough at the moment if you’re applying for a mortgage. The financial environment is far more stringent than in the summer of last year and people need to be prepared for rejection. This time last year house prices were 10 per cent cheaper – and the year before that they were 20 per cent cheaper – so it’s no surprise that the CML has suggested the number of first-time buyers on the market is dwindling.
“But with so many applications being rejected it’s unlikely that only first-time buyers are being affected. Anyone looking to remortgage should apply with caution and take professional advice if they’re unsure – too many failed applications could affect your credit rating. Lenders quite reasonably do not want to take risks when there are pressures on how much people can afford, so it’s up to the applicant to convince their bank that they can cope with the repayments.”
In addition to this, moneysupermarket.com has noticed that the percentage of first-time buyers has dropped by a fifth in the same time frame. As a result of rising interest rates and there being fewer properties on the market available to those buying their first home, first-time-buyer mortgage applications have fallen by 20 per cent.
Moneysupermarket.com’s figures also revealed that people are increasingly unwilling to put their trust in the economy, and alternatively are going for fixed-rate mortgages to remove the risk of further interest rate rises. Compare Mortgage Deals
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