Mortgage approval rates in the UK fell to their lowest level in two years in April, according to data from the Bank of England, as high interest rates and the cost of living crisis reduced consumer confidence dramatically.
With the economic outlook showing no signs of improving, many first-time buyers are understandably feeling uncertain about their chances of securing their dream house.
But the good news is that there are several techniques that Brits can employ in order to maximise their chances of getting approved for a mortgage, even in the current financial climate.
Claire Flynn, mortgages expert at money.co.uk said: “Applying for a mortgage is a nerve-wracking experience, and the cost of living crisis hasn’t made anything easier. However, there are certain things you can do to boost your chances and secure the best deal you can.
“If you’re applying for your first mortgage you should be aware of what lenders look out for when they consider your application. Here are some of the main factors:
- Your credit score
- Any current debts
- The size of the loan you want to take out
- The size of your deposit
- Your employment status and income
- Your outgoings
“When it comes to starting your application, beat lenders to the punch and take an in depth look at your finances yourself.
“This means making sure all your financial records are correct and up to date, that old, inactive accounts are closed and you’re aware of any outstanding debts you may have. If you do spot any issues or red flags, hold off on applying until you’ve resolved them.
“Once you’re confident in your finances, a good way to increase your appeal to lenders is by boosting your credit score.
“Your credit report works as a scorecard to show lenders how good you are at making debt and other payments – so the first thing you should do is make sure your personal details are correct.
“Errors on things like your address can have a big impact on your score, so contact your credit reference agency immediately to amend them and if a bank or similar still has your old address, contact them and get them to update it to your current one.
“Being on the electoral roll also makes a big difference. Lenders see that as a sign of reliability – so if you’re not signed up to vote, do that too. It’s difficult to have an excellent score if you’re not.
“Once you’ve corrected any errors and all your details are correct, the next step is to start showing evidence that lenders can trust you with their money.
“Every payment you make on time, whether that’s a debt repayment or just your rent and bill payments, has a positive effect on your credit score.
“Using a credit card and repaying it on time can help your credit score, as it shows you’re reliable when it comes to managing debt. But if you’re struggling to take out a card thanks to past mistakes, it can be tough to show you’ve changed your habits.
“A credit-building card, or service like Loqbox where you make regular payments to a savings account, is a good option when it comes to showing evidence of this. If you make small transactions each month then pay it off in full you can start building up your score.
“It’s not instant, but after a year the effect is considerable, and you should even see some benefits after only a few months.
“The last thing to bear in mind is that different lenders will prioritise different factors in your application, so even if one lender rejects you, it doesn’t mean that you won’t be accepted by another.
“That said, if you do get rejected, it’s worth holding off from automatically applying with a new lender. Every time you apply you undergo a credit check and too many checks in a short space of time can negatively affect your credit score.
“Applying for your first mortgage can be daunting, but by maintaining good financial habits and boosting your credit score you can maximise your chances of approval.
“To compare the very best first-time buyer mortgages from the top providers visit: https://www.money.co.uk/mortgages/first-time-buyer-mortgages.”