Major high-street banks are being urged to offer more support to mortgage applicants whose applications are likely to be rejected. A new initiative called “Thanks for Nothing” has been launched by specialist mortgage platform with the aim of preventing rejected applicants from becoming trapped in ongoing rejection cycles.
Hayton voiced concern that major banks and lenders are not providing nearly the kind of support first-time buyers need to get on the property ladder in the UK. On up to 50% of the platforms, customers said that their mortgage applications had been declined by at least one other lender or broker.
This initiative could prove particularly useful for applicants with a poor credit history and the self-employed, who, despite being able to comfortably afford a mortgage in most cases, are often automatically declined.
“Self-employment and poor credit histories are on the rise in the UK, so a growing number of people applying for mortgages simply don’t fit the traditional financial mould,” said Paul Cos, co-founder of Hayton.
“Many are being rejected by traditional lenders and online mortgage brokers that can’t see past their situation, while others will be put off from applying at all.”
Rejected applicants are discouraged from reapplying
A survey conducted by the mortgage experts at Bluestone in 2019 found that almost half of all declined mortgage applicants are discouraged from reapplying with other lenders. The survey also found that comparatively few subsequently seek the input of independent brokers or advisers.
In the wake of three consecutive lockdowns, market watchers expect declined mortgage application volumes to continue growing for the indefinite future.
Speaking on behalf of Bluestone Mortgages, CEO Steve Seal commented on the extent to which the coronavirus crisis has intensified economic uncertainty for many households.
“Covid-19 has left people in financial difficulty, and as a result, many will emerge from the Covid-19 pandemic with more complex borrowing needs,” he said.
“We have already seen evidence of this, with our application volumes in January and February 2021 increasing by 90% compared to the same period in 2020.”
“We anticipate this trend to continue over the coming years as borrowers navigate the fallout of the pandemic and increasingly approach lenders who can support them with affordable financing.”
More applicants declined by major banks
Bluestone also reported that around 37% of mortgage brokers have found that most cases that involve referring clients to specialist lenders are attributed to application rejections from major high-street banks. This represents a major uptick from the 29% recorded last year.
It was determined that 68% of application refusals are based on poor credit, 28% on adverse credit, and 22% on regular income streams. 18% of application refusals resulted from CJJs, according to the data from Bluestone.