Thousands of mortgage applicants are facing the emotional toll of being locked out of the ‘broken’ mainstream market. This is according to new research published in Together’s Residential Property Market Report.
Back in 2022, in the aftermath of the Covid crisis, 19% of non-standard mortgage applicants – those that don’t neatly fit the automated criteria of mainstream banks and building societies – had been rejected in the past one to five years.
Two years on, Together’s research reveals mortgage acceptance rates are still painfully low for these applicants with ‘non-standard’ needs, with 7% still struggling to secure a mortgage.
This could be for those wishing to buy a property under the Government-backed shared ownership scheme, or who may be denied access to finance because of their age, employment situation, impaired credit history or a combination of these factors.
For example, two in five (39%) of potential borrowers attempting to get on the housing ladder said their mortgage application had been rejected because they were buying through shared ownership.
Nearly a third (29%) were denied due to having a thin or impaired credit history and 27% said this was due to them being over 55 or divorced, while 22% said this was due to being self-employed.
Together’s research shows a marked need to support such underserved borrowers, with the specialist lending market forecast to swell from £32bn to £54bn over 2023-29 – a 70% increase.
And the stress of rejection because of these factors is impacting on applicants’ emotional health. For example, a quarter of ‘non-standard’ applicants who have tried to get a mortgage have felt stressed or upset at times during the process – including those who are self-employed, older or divorced. 14% of this group have also felt judged when trying to get a mortgage – rising to almost a quarter (24%) of those with thin or impaired credit.
When asked what they found challenging when applying for a mortgage – 32% said it was the time spent gathering information for the application and 17% said it was too difficult or time consuming to meet all the requirements for a successful application.
Together’s chief commercial officer Ryan Etchells commented: “Life and work as we’ve known it is evolving and there are now more of us who don’t comply with the ‘one size fits all’ lending methods of what worked for previous generations.”
“In order to support more people with their property ambitions, we need to work in step with the wider industry to make the application process as seamless as possible, and continue to challenge the outdated systems, processes and stereotypes which are responsible for many of the access barriers that exist.”
He added: “Chancellor Rachel Reeves’ Budget in October saw the important task of cementing plans for the Affordable Homes Schemes and house-building efforts from next year. But what’s missing is Government intervention at industry level to reassess exactly how to bridge the issue of affordability and home ownership in the UK whilst specialist lenders look to continue to support those that are locked out of home ownership by a broken mainstream mortgage market.”
