A majority of would-be homebuyers are holding back from applying for a mortgage because of outdated assumptions about deposits, affordability and eligibility, according to new research from broker Alexander Hall.
The survey, which focused on people aspiring to buy a home but who had not yet enquired about a mortgage, found that many could in fact be in a position to purchase without realising it. The most common reason for hesitation was a belief that their deposit was too small, while other barriers included fears of being declined, concerns about insufficient income, doubts about affording repayments and embarrassment about sharing financial history.
SELF-EMPLOYED AND CREDIT WORRIES
Respondents also cited self-employment status, existing property ownership and poor credit history as reasons for delaying an application. But Alexander Hall’s analysis shows that many of these perceived obstacles are not as insurmountable as buyers assume.
A third of those surveyed thought that at least a 10% deposit was required, despite the widespread availability of 5% deposit products, and new options at zero or 1% deposit. Lenders typically require only one month of bank statements rather than the lengthy histories some fear.
For the self-employed, many lenders accept two years of certified accounts, with some prepared to consider just one year. Meanwhile, mortgage multiples of 4.75–5 times income are now common, with some lenders stretching further for applicants with strong profiles. Alexander Hall’s own data shows that first-time buyers are currently borrowing an average 4.08 times income, up from 3.86 last year.
MISUNDERSTOOD RULES
Almost half of respondents believed that owning a property prevented them from buying jointly with a partner, when in reality joint applications can improve affordability. And while two-thirds thought poor credit history meant automatic rejection, specialist lenders continue to accept applicants with adverse records provided the circumstances are clear.
Stephanie Daley, director of partnerships at Alexander Hall, said: “Mortgages can be complicated and daunting, and it’s completely understandable that many aspirational homebuyers may be put off from enquiring and don’t realise that they could already be in a position to buy.
“This is largely down to the fact that a number of mortgage market myths exist, but we’ve seen notable improvements across the mortgage landscape of late that are helping to put many of these myths to bed.”
She added that the relaxation of loan-to-income multiples and greater availability of low deposit mortgages were “vastly improving the chances of getting a mortgage, even for first-time buyers or those who may have previously felt their financial position was a barrier”.
Daley urged buyers to begin with professional advice, noting that mortgage advisers can act as a bridge between customers and lenders, helping buyers navigate a process that may otherwise feel overwhelming.
