September 25th, 2023

Mortgage approvals are falling. Here’s how we can help

Since the Covid-19 pandemic swept the world, we’ve experienced many financial consequences – and a shift in the mortgage market is one of them. 

Read on to find out how mortgage affordability has changed recently, the effect this is having on consumers, and how our mortgage team can help if you’re searching for a deal this year.

The economic impact of the Covid-19 pandemic caused inflation to increase, prompting the Bank of England to raise interest rates

When the UK government issued lockdown guidelines in March 2020, the economy slowed down almost overnight. As a result, the Bank of England (BoE) decreased its base interest rate to just 0.1%, a historic low. This move was made to encourage borrowing and to help prevent the economy from stagnating.

Since lockdowns were eased and the effects of the pandemic lessened, though, the BoE has raised the base rate 14 consecutive times, bringing it to 5.25% as of August 2023. In September, the BoE’s Monetary Policy Committee (MPC) voted to keep the base rate frozen at 5.25%. 

The BoE has largely implemented these recent rises in response to the rate of inflation which soared throughout 2022, peaking at 11.1% in October. The Office for National Statistics (ONS) reports that UK inflation stood at 6.7% as of August 2023 – far above the BoE’s 2% target.

This sharp spike in central interest, along with other market factors, has had a knock-on effect on mortgage affordability up and down the UK, with mortgage lenders raising minimum rates above 5% in many cases. 

As of 22 September 2023, Moneyfacts reports that the lowest fixed rate available for a five-year moving home mortgage was 4.99%.

If you’re set to remortgage your home soon, are looking to buy a new home, or are helping your children onto the property ladder, you could feel concerned about affordability. 

Indeed, affordability factors have prompted economic forecasters to warn that mortgage approvals could fall by up to 11% throughout 2023, according to a MoneyAge report. 

While a refusal may not affect your credit report in itself, multiple mortgage applications could place doubt in the mind of a lender in future.

So, here are two simple tips to aid your mortgage applications, and how our specialist mortgage team can help you. 

2 simple tips to help boost your chances of securing a mortgage agreement this year

1. Be realistic about your goals

We all have a “dream home” in mind, and while you may have worked incredibly hard to finally secure yours, it’s important to be realistic about your mortgage goals.

When assessing your circumstances, mortgage lenders look at:

  • Your earnings and expenditure
  • Any other debts you already have, such as a car loan
  • Other properties you own already
  • Your credit report
  • The amount you’ve saved as a deposit on the property.

If any of these aren’t up to scratch, this could be grounds for a lender to reject your application. So, if you’re looking to move home, it may be beneficial to assess the price of the properties you’re looking at.

Doing so could help you avoid disappointment, and may enable you to improve your credit report by achieving an approval on your first application.

2. Keep your finances “clean” for 6 months before applying

One vital step to take when preparing for a mortgage application is to look at your financial circumstances from a lender’s point of view. Look out for:

  • “Bad” debt, including payday loans
  • Consistently dipping into your overdraft (which can signify that you’re living beyond your means)
  • Late credit card repayments
  • Actions that are considered “financially irresponsible” by some lenders, including gambling.

Even if you’re a person who takes their expenditure seriously, any of the above points could place doubt in your lender’s mind.

As such, it may be beneficial to pay attention to these areas in the six months leading up to completing your mortgage application. 

Our new mortgage team are on hand to help you every step of the way 

As you may have read about last month, we’ve put together a specialist mortgage team to help our clients tackle the homebuying and remortgaging challenges you might be facing.

Made up of market experts, Andrew Prosser and Rachel Robb, and supported by Natalie Link, this team is here to answer questions and provide guidance on:

  • How the mortgage market is changing for both homebuyers and those remortgaging in their current home
  • Ways to improve your chances of securing an affordable agreement
  • Your equity release options.

If you’re feeling worried or stressed about your mortgage circumstances at the moment, our experts are on hand to answer any questions you may have. 

To find out more, email or request a callback from one of our advisers.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration. Equity Release will reduce the value of your estate and may affect your entitlement to means tested benefits. Your home may be repossessed if you do not keep up repayments on your mortgage. 

Think carefully before securing other debts against your home.

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