According to a survey, almost half of potential first-time buyers have turned down a mortgage.
And nearly two-thirds (62 percent) said buying a home felt less achievable in current economic conditions.
Over a third (35 percent) have been turned down for a mortgage once.
Another out of ten (10 percent) was turned down more than once in August, according to a survey of more than 1,000 potential first-time buyers.
The most common reason for rejection was that, according to Aldermore Bank, the applicant was self-employed or a contract worker.
This was a change from the bank’s first-time buyer index, conducted in March, when it was the ninth most common reason an application was rejected. The most common reason for rejection at the time was the applicant’s existing debts.
Other main reasons potential first-time buyers were turned down for a loan in the August survey were insufficient deposits or income and poor credit ratings.
A third (34 percent) of people who tried to get on the real estate ladder said they wanted to improve their creditworthiness by paying bills on time, paying off debts, or registering on the electoral roll.
Some had also given up their self-employment status because they felt it could give them a better chance of getting a mortgage.
Since March, many low-deposit mortgage deals have disappeared from the market as lenders became increasingly concerned about the potential for falling house prices.
In this scenario, homeowners who have made the smallest deposits may be at greatest risk of falling into negative equity – with the amount they borrow outweighing the value of their property.
The UK government is planning a new 5 percent deposit-taking mortgage scheme. Further details on the delivery of these loans are pending.
Jon Cooper, Head of Mortgage Distribution at Aldermore Bank, said, “A decline in a mortgage can be a disappointing experience for those looking to pursue their dreams of home ownership. But don’t despair, as the opportunities for first-time buyers and self-employed have expanded over the past decade. ‘
He said there has been growth in specialized lenders who can handle more complicated applications.
Mr. Cooper added, “The current generation of first-time buyers is now much more diverse and coming from a wide range of financial backgrounds. But one constant is that they all find the process confusing and complicated, and the pandemic has only made this worse.
“It can feel daunting at times, so we recommend seeking advice from a mortgage broker who can provide a comprehensive view of the market and options that are tailored to a new buyer’s unique circumstances.”
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