Thousands of potential homeowners aren’t applying for a mortgage because they mistakenly believe they would be turned down, new research suggests.
Seven out of ten (70%) people think a low credit score, zero-hour contract, payday loan, new job or even parental leave would prevent them getting a mortgage, according to mortgage advice website Online Mortgage Advisor.
Nearly half (47%) believe a low credit score could stop someone getting a mortgage, one in three (33%) think a zero-hour contract would be a barrier and 15% think a payday loan would stop an application from being accepted.
While it is not necessarily the case that these would be automatic barriers to getting a mortgage, it can make it harder for some and those who are accepted may have to pay a higher rate of interest or borrow a smaller sum than otherwise.
The survey – which questioned over 2,000 people – found the same percentage believe starting a new job or being on a probation period would prevent an offer being made and 6% think parental leave could cause problems.
Pete Mugleston, managing director at Online Mortgage Advisor, says a huge number of consumers are in the dark about what would prevent them from borrowing.
He says: “It’s sad to think so many people would avoid applying for a mortgage because they think they’d automatically be turned down as a result of a reason that is actually acceptable for many lenders.
“We may be a long way away from the pre-credit crunch days of no income, no job or asset mortgages and free-for-all credit, but lenders do recognise that people’s circumstances have changed and as such, many have adjusted their criteria to reflect this.”
He adds: “Lenders will use the information found within a credit report to assess a customer’s eligibility, but they…