Mortgage snub rate leaps 60%
The number of borrowers rejected by mortgage lenders has leapt in the past six months as it has become more difficult for financially insecure house buyers to borrow.
More than 738,000 applicants have been turned down by mortgage companies, a rise of almost 60 per cent since March, according to financial information provider MoneyExpert.com.
The company said the figures reflected the flight to safety by many lenders following difficulties for banks to borrow or securitise their debt, as well as two interest rate rises since May.
Some lenders are now less willing to provide money to riskier borrowers and first-time buyers, who typically need to borrow more with fewer guarantees.
Subprime mortgage specialist Edeus believes the tightening of criteria by lenders has reduced the size of the mortgage market by more than £50bn.
“All lenders, especially those that securitise their debt, are looking after their balance sheets and being choosier about who to lend to,” said Alan Cleary, managing director at Edeus.
“We think this market is going to drive customers away, and shrink from the £350bn of gross advances last year to about £300bn.”
Almost all lenders in the riskier parts of the market - including buy-to-let - have now changed their loan-to-value ratios, raised rates and reduced overall loan sizes, although this is far less pronounced in the mainstream mortgage market.
The survey showed that first-time buyers were at a particular disadvantage, with around 382,000 people under 35 having had an application turned down.
The Council of Mortgage Lenders said last week affordability levels had worsened, with first-time buyers now typically borrowing 3.38 times their income.
Figures released on Monday by moneysupermarket.com suggest the number of first-time buyers has dropped 20 per cent since March.
The TNS poll for MoneyExpert.com surveyed more than 1,000 people.
