Lending targets prompts mortgage rejections: Brokers

Lenders have rejected mortgage applications on trivial grounds because end of year targets have already been met, brokers have claimed.

Several brokers have cited cases where they believed lenders have turned down applications in order not to outperform their yearly targets, prompting higher demands for next year’s output.

Martyn Leader, a broker for Suffolk-based The Mortgage Centre, said Birmingham Midshires had rejected a buy-to-let mortgage application on the grounds that the client had taken hire purchase on a car two years ago, with one year left, and that the individual had sizeable savings from a recent property sale.

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Mr Leader said: “It did seem like a trivial way to decline the application.

“I suspect what BM is doing is controlling output through its credit scoring and that they will work up the reasons for declining things.”

Mr Leader added that the opposite could be happening with Halifax, with the lender currently appearing more lenient on applications than it did earlier in the year.

He said: “Halifax seems to be accepting things they would not have accepted a few months ago - for the first six months of the year Halifax was tightening up its credit scoring.”

Tom Fielding, an IFA for Monmouthshire-based Fielding Financial Services, which deals with mortgages, said: “In cases like these, lenders will just say that they are being responsible and should not be seen to be lending more than people can afford to repay.”

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “There may be lenders that may feel they have done enough now (in terms of meeting targets) and may find reasons not to do things.

“That would not be unusual if they want to be selective. That is something lenders reserve the right to do. Whether it is right or wrong is another issue.”

But Mr Sinclair added: “I am not hearing a great deal about this but I am aware that there are certain pressures around the rate of approvals.”

Right to reply

A spokesperson for Lloyds Banking Group, parent company of Halifax and BM, said: “Our aim is always to ensure our mortgages suit the needs and circumstances of borrowers, and that borrowers are able to repay them and not likely to face financial hardship.”

The FCA declined to comment on the subject of lenders’ criteria.