Homeowners are facing mortgage payment hikes after the Bank of England raised interest rates last week from 3.5 per cent to 4 per cent to help bring down double-digit inflation. This is the tenth time in a row that the Bank of England has increased interest rates and the highest level since 2008.
For homeowners on a standard rate variable mortgage or a tracker mortgage, they are likely to see their monthly payments go up. However, monthly repayments will stay the same for those on a fixed-rate mortgage, but will probably increase when their current deal period ends and they have to re-mortgage.
These are factors those looking to get a foot on the property ladder for the first time will need to take into account, but there are also a number of things which can prevent a potential borrower from being approved for a mortgage - even if they have a significant deposit saved up.
This can be really frustrating for prospective buyers, particularly if they are not sure why they were rejected in the first place.
To help potential homebuyers navigate the tricky world of mortgage approval, property experts at www.onlinemoneyadvisor.co.uk have shared the top reasons why you might be rejected for a mortgage, and what you can do about it.
Why can’t I get approved?
There are many reasons why you might be rejected for a mortgage, and it’s unfortunately quite common for mortgages to not be approved, so don’t be disheartened.
The main factor is income, affordability and creditworthiness - if your salary is lower than the lender is looking for, or you have a bad credit history, mortgage lenders won’t feel as confident that you’ll be able to keep up with monthly repayments.
In addition to this, having a history of regular gambling or being in your overdraft can be a sign of financial mismanagement, and lenders could deem you to be too much of a risk to approve.
It's also possible for your mortgage application to be declined further down the process, even after it has been provisionally accepted. This could happen after the lender has concluded its valuation of the property, or even as late as once contracts have been exchanged.
While an agreement in principle is a great way to secure acceptance from the house seller, it’s important to keep in mind that it’s no guarantee and lenders could change their minds on your application after this.
Don’t re-apply immediately
If your mortgage application has been declined, it might be tempting to simply apply again immediately to a different lender, particularly if you have your sights set on a certain property already.
However, the experts advise refraining from simply trying your luck again as there’s no guarantee you’ll get a different result, and consulting with an experienced mortgage broker first can help you understand the reason for your rejection and correct it, increasing your chances of a better result.
A healthy credit report is key
Your credit report is a major factor for lenders, when deciding whether to approve your mortgage application. This is another key reason why you shouldn’t apply again straight away, as too many requests for finance in a short space of time can be a red flag for lenders, and might harm your applications in the long run.
Get support and advice
There are mortgage brokers who specialise in assisting with an application that hasn’t previously been approved.
If you’ve been rejected, and want some advice on how to turn things around, it’s vital that you research and work with an experienced broker who has a track record of helping to salvage mortgage applications that have been declined before.
They will have in-depth knowledge of all of the reasons you might have been turned down, as well as advice on how to correct any problems with your application.
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