How many applicants are denied a mortgage?

Adverse credit is one of the main reasons why

How many applicants are denied a mortgage?

More than one in every five potential mortgage borrowers (23%) have had their application rejected in the past 12 months, with adverse credit one of the main reasons for the denials, according to a study by specialist lender Together.

Over a quarter, or 26%, of those planning to buy homes via Help to Buy or shared ownership had their application rejected. Having a county court judgement (CCJ) on their record was another key reason for being turned down for a mortgage (29%).

Together said that 17% of all UK adults are categorised as having adverse credit, regardless of whether they’ve had their mortgage approved, rejected, or not even having applied. This includes those who may have missed payments on a loan or credit card (7%), missed a payment on an unsecured loan (6%), entered a debt management plan (6%), been issued with a CCJ (4%), or defaulted on their mortgage or other loans (4%).

The lender has warned that with the cost-of-living crisis impacting people’s finances and ability to keep up with mortgage repayments, the likelihood of factors affecting applicants’ credit scores is expected to increase dramatically.

The study, Together said, highlights the need for specialist support for lenders to take into account the reasons a borrower may have suffered adverse credit, which can be for something as minor as missing a phone bill.

With uncertainty looming over people’s finances, a mortgage rejection can exacerbate feelings of stress and could lead people to step away from pursuing homeownership altogether, Together pointed out.

Among those who had been turned down, 32% said the result left them feeling worried for their future, 26% said it made them depressed, and a further 23% said they felt like a failure.

“It is imperative that the mortgage market works towards becoming more inclusive, especially as today’s cost-of-living crisis will likely have a long-term impact on our financial wellbeing,” Pete Ball (pictured), personal finance chief executive at Together, said. “As the cost-of-living crisis shows no signs of letting up, we anticipate the proportion of those with adverse credit is set to rise in the immediate-term.

“We will see more potential borrowers being overlooked by some mainstream lenders because of factors, such as missing a bill payment on a credit card or another type of unsecured loan. These credit blips may date back years – or be something the applicant is completely unaware exist – but can have repercussions on their ability to successfully apply for a mortgage.

“Our research into the mortgage market highlights the growing need for specialist lenders to help remedy the issues faced by borrowers who are categorised as ‘non-standard’ or with adverse credit. However, a longer-term plan must be put forward and supported by the government to address the issues facing potential borrowers today.”