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First-time buyer mortgage rejections rise during Covid

First-time buyer mortgage rejections rise during Covid
 Credit: Pixabay via Pexels

The number of first-time buyers who have been rejected for a mortgage has risen over the course of the pandemic, according to research from Aldermore.

A survey of more than 1,000 prospective first-time buyers found 81 per cent were rejected for a mortgage at least once, up from 53 per cent year-on-year.

First-time buyers in March were more than twice as likely to have been rejected multiple times for a mortgage (43 per cent) when compared to last year (17 per cent).

Only one in five (19 per cent) looking to buy their first home were able to get a mortgage on the first attempt, compared to half (48 per cent) in March 2020.

Poor credit history was found to be the main reason for a rejected mortgage application from a prospective first-time buyer (41 per cent), double that of March last year, at 19 per cent.

Indeed, the research found one in five first-time buyers (19 per cent) worried their credit rating had gotten worse since the coronavirus outbreak.

During the Covid-19 pandemic the number of high loan-to-value products also plummeted, adding to the problems first-time buyers have faced.

The number of 90 per cent LTV loans fell from 776 in February 2020 to 277 a year later while the number of 95 per cent LTV loans fell to just five.

Jon Cooper, head of mortgage distribution at Aldermore, said: “The data shows that the pandemic has added to already challenging conditions for those trying to get on the housing ladder but first time buyers should not despair.”

Cooper added: “The growth of specialist lenders, that through human underwriting can dig into the detail of more complicated applications, have opened the door for those with complicated income streams or credit issues in their past to find a pathway to home ownership.”

Luke Spellman, mortgage broker and owner at Spellman Financial Services, said: “The findings correspond with our experience. We have found that lenders have particularly tightened up their credit scoring criteria for those with smaller deposits, when compared to how things were pre-Covid.”

chloe.cheung@ft.com

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