A significant number of mortgage applicants are being rejected unnecessarily, and not given access to specialist solutions that could help them secure a home, according to new research from Shawbrook.
Shawbrook’s Home A-Loan report, which looks at specialist lending and the struggles facing prospective buyers, found that over a third (34%) of people who were declined for a mortgage were never referred to a specialist lender, despite many of them meeting the criteria for one.
The key reasons cited for mortgage applications being declined include volatile income (26%), poor credit score (25%), missed payments (21%), and unaffordability (21%). These are profiles that specialist lenders are designed to support, and can impact a wide variety of people like the self-employed, contractors and those with past credit blips.
This lack of signposting and support for borrowers with untraditional streams of income or imperfect credit impact many in their journey towards property ownership, highlighting a significant issue in the UK’s mortgage market.
Adding to the problem, only a quarter of consumers (25%) actually understand what a specialist lender is and how to access one, and nearly half (46%) have heard the term but don’t know what it means. As a result, thousands of potential homeowners are left in the dark.
Specialist lending can be a solution for people turned away by high-street lenders. For people who sought more tailored help via a mortgage broker, 97% of borrowers found the right lender with the help of their broker, and the same proportion (97%) valued their broker’s specialist market knowledge. 95% also said brokers made the application process easier.
Despite this, only 22% of applicants had actually used a broker - demonstrating the need for increased knowledge on the support available for those on their homeownership journey.
Steve Griffiths, Commercial Director for Retail Mortgages at Shawbrook, comments: “There is a concerning lack of support for those with unconventional profiles, whether this is due to their employment type or credit history - and this can often stop people's homeownership goals in their tracks, without any explanation or advice for next steps. Specialist lending is a solution to this dead-end, but it continues to be something that only a minority of borrowers understand, or are even aware of.
“Everyone deserves an equal footing on the property ladder, especially as the market and economy continues to change, and there isn’t a cookie-cutter image of the perfect borrower. Too many people think a ‘no’ from one lender means the end of the road. In reality, there may be a perfectly viable solution - but the industry needs to do a better job of helping people find it.”
