Most first-time buyers have rejected mortgage application

Image copyright Sainsbury’s Image caption Fannie Craven with children

The majority of people shopping for a first time home will say they’ve had a rejected application for a mortgage, says a new report.

Almost two thirds – 62% – have been denied by a lender, according to research by Sainsbury’s Bank.

New research suggests that young people find it difficult to get a mortgage, despite having good credit histories.

Forty per cent said the size of the deposit was a major problem – while 43% also said the minimum property value was a major obstacle.

A separate report by Fannie Mae, the US federal housing agency, said more than half of all first-time buyers (56%) fell behind with a payment before they had saved a deposit for their property.

It said 29% of borrowers were struggling to make their payments after four years and more than half of those had the rate of failure increase from year to year.

New mortgages should allow “maximum risk mobility”, it said, but many customers had deals that did not allow them to move around home ownership.

Government supports

The state now offers two-thirds of help to buy mortgages.

The government sets a limit on how much borrowers can borrow, based on their own credit worthiness and security for the loan.

Currently, those under 40 are on loans linked to house prices below £300,000, while those over 40 are on loans below £500,000.

Richard Sexton, director of e.surv chartered surveyors, said affordability is a real issue for younger buyers.

But he said the availability of government support for those at the lowest income levels “needs to be urgently reviewed” if it was not to “accelerate” the decline in home ownership.

Recent analysis showed that household incomes had risen by just 1% in the last 20 years, while house prices have doubled.

According to the Fannie Mae report, first-time buyers were also often put off by lenders’ lending criteria, saying “the largest barriers were typically the lender’s product mix” and being forced to buy a high proportion of the property in their area.

Image copyright Getty Images Image caption House prices are up 8% compared to two years ago

First-time buyers generally do not have access to mortgages based on house prices – which means large deposits are not normally a problem.

However, those on lower incomes are often offered loans on houses at prices that far exceed what they could afford in their area.

Tom Lewis, director of First Finders (the UK’s largest online mortgage broker), said getting on the property ladder was “far from straightforward”.

“Advisors often recommend that buyers ensure they have a high enough deposit to make a move for their dream home a realistic option.”

The National Housing Federation (NHF), the industry trade body, also has a home ownership picture, saying 44% of homes were rented in 2016 compared to 41% in 1995.

Properties worth just over £250,000 accounted for more than half of them, it said.

A 2016 report by researchers at Durham University said landlords were being priced out of being able to buy decent homes in many of the English cities in England’s big cities.

Liz Peace, chief executive of NHF, said in cities like Manchester and Liverpool landlords were likely to be the majority, and in others such as Bristol, some private landlords are leaving.

“While many private landlords also want to buy, they simply cannot, because lenders are targeting owners with large deposits of more than a 5% deposit,” she said.

“They risk being priced out of the market, because they are currently being offered 90% mortgages.”

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