Misconceptions about mortgage eligibility may be prompting aspiring first-time buyers to abandon their plans before exploring the options available to them, research from Lloyds suggests.
A study of more than 1,000 prospective first-time buyers found that 58% incorrectly believed existing debt would automatically prevent someone from securing a mortgage, while 37% thought a 20% deposit was essential.
Other perceived barriers included being on a zero-hours contract, cited by 54%, using an overdraft, at 40%, and receiving benefits, at 38%.
Almost a third, or 31%, believed that changing jobs recently would rule out an application, while 30% pointed to not having a perfect credit score. Being self-employed was seen as an automatic barrier by 24%.
Further concerns included earning less than £50,000 a year, cited by 27%; using Buy Now Pay Later, at 21%; being on maternity or paternity leave, at 20%; and having student loan debt, at 13%.
Lloyds said none of the factors would automatically prevent most lenders from offering a mortgage, although decisions remain subject to individual circumstances and standard affordability and eligibility assessments.
Providers typically examine income, outgoings and overall affordability rather than relying on one part of an applicant’s financial circumstances.
The bank has partnered with Livi Sheldon, the Gladiators star, television personality and first-time homeowner, to draw attention to misconceptions that may discourage prospective buyers from seeking advice.
BUYERS DELAY LIFE MILESTONES
More than a third of those surveyed, or 37%, said they were particularly concerned about being rejected for a mortgage.
The research also found that 53% had delayed or abandoned important life milestones while trying to buy their first home. These included travelling, cited by 28%, buying a car, at 15%, getting married, at 14%, and having children, also at 14%.
Almost two-thirds, or 64%, had reduced their day-to-day spending. Holidays were sacrificed by 46%, while 41% had cut back on eating out and 39% on buying new clothes.
Amanda Bryden, head of mortgages at Lloyds, said: “Buying your first home can feel overwhelming, especially when you’re trying to save for a deposit while balancing everyday costs and other life goals.
“Our research shows many aspiring first-time buyers believe they need to be debt free, have a perfect credit record or save a 20% deposit before they can even think about getting a mortgage.
“In reality, mortgage decisions are based on a much broader picture of your finances and circumstances. While affordability is important, don’t rule yourself out because of misconceptions about what lenders look for.
“This isn’t something people need to navigate on their own. Speaking to a mortgage adviser or broker early on can help you understand what options are available.
“Many people are surprised to find they’re in a stronger position than they expected.”
Sheldon said: “Buying my first home was an incredible milestone, but I know how easy it is to look at the challenges involved and wonder whether it’s achievable.
“A lot of people assume they need everything to be perfect before they can even think about getting a mortgage, but that’s not necessarily the case. Talking to experts and understanding your options can make a huge difference.
“Getting on the property ladder isn’t easy, especially when you’re working hard to save, cutting back on things you enjoy and putting other plans on hold. But it’s important not to rule yourself out before you’ve explored what’s possible.”
