Borrowers being let down because the mortgage industry is “not fit for purpose”


Pete Ball

The mortgage industry is failing to keep up with modern borrowers’ needs, it has been claimed, after a new survey revealed more than half were rejected for lifestyle choices including being self-employed or buying a converted home.

A study of the market commissioned by lender Together found a huge percentage of mortgage applicants – 54 % who’d fallen out of the application process – had been denied a home loan for reasons that could be considered ‘normal’ by most people.

These included factors once believed to be ‘non-standard’ such as their employment type; they could be self-employed, a contract worker or take a dividend, or the type of property they were looking to buy, including conversions or high-rise flats.

Pete Ball, pictured, personal finance CEO at Together, said many mainstream lenders needed to keep pace with the demands of these types of borrowers. Some banks and building societies remained reliant on a computer-automated approach, and outdated and rigid criteria – when deciding mortgage applications, he said.

“The world has changed,” said Mr Ball. “People’s pay, working patterns and pensions have altered beyond all recognition from 30 or 40 years ago. Even where they live, who they chose to live with, or the type of property they want to buy is vastly different from a generation earlier.

“What was previously thought to be ‘normal’ simply doesn’t exist anymore.”

Together’s wide-ranging study, which was conducted by market researchers YouGov, surveyed about 2,000 people about mortgage applications and the reasons why some of them had fallen out of the mortgage application process.

It builds on earlier research by the Intermediary Mortgage Lenders’ Association (IMLA)* which revealed a significant proportion of the UK population fail to secure a home loan between an initial enquiry and the time they would receive a mortgage offer.

The latest survey discovered that, of those rejected, 12% were denied because of their employment type, while 3% had insufficient employment history. This could be despite potential borrowers being in a good position to repay their mortgages.

One in ten (10%) were denied because the property they wanted to buy was considered ‘non-standard’, which could mean anything from a converted barn to a high-rise apartment.

Self-employed workers are also being “locked out” of the mortgage market by some lenders, Mr Ball said. Labour market data shows the population of people who are working for themselves has soared by a quarter in the past decade to 4.8million**, making them a cornerstone of the UK economy.

Millennials – those aged between 18 and 34 – were worst hit overall – with two thirds (66%) who took part in the survey failing to get on the housing ladder because of the way they live and work nowadays,  which may mean they do not meet some mainstream lenders’ criteria

Older people also seem to be missing out, the research suggests. A total of 46% of over 55s were denied home loans, some because they were too near retirement age. This could pose a growing problem in the future, as the age of the UK population rises, said Mr Ball, with the number of people aged 65 and over in England and Wales is projected to increase by 65 per cent to more than 16.4million in 2033.***

Andrew Montlake, of mortgage broker Coreco, said:

“Across the country, people are living and working longer and have varying ideas of what their perfect home will be at different stages throughout their lives.

“Unfortunately, much of the mainstream mortgage market has been slow in catering for these potential borrowers, who make up a wide section of society. The market needs to continue to adapt to make sure it remains fit for purpose.”

Additionally, nearly one in five (18%) people who took part in the Together survey were turned down because they had a low credit score or a lack of credit history.

Surprisingly, fewer than one in ten (9%) of those who took part in the market research said they’d been turned down because their deposit was too small and 16% said they were not earning enough to afford repayments on their home loan.

Over a quarter (27%) of rejected applicants who did not obtain a subsequent mortgage were put off ever going through the process again – shelving their dream of owning their own property – rising to 32% for over-55s. One in ten (10%) of those who withdrew a mortgage application/ enquiry the last occasion they were unsuccessful pulled out before receiving an offer as they found the process too complicated, and 7% said there were too many stages.

A disappointing 28% who were originally unsuccessful have not secured a mortgage.

Mr Ball said:

“As a lender, we’ve been providing flexible, common sense lending for over 44 years, so we recognise that was once considered unusual or specialist is now becoming more normal, and the mainstream needs to be able to adapt to the changing world.”

* IMLA Mortgage Market Tracker Q4 2016



All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2003 adults. Fieldwork was undertaken between 31st May – 25th June 2018.  The survey was carried out online.