Declined Applications

There are a number of reasons why your mortgage application could be declined or refused. The most common reason is poor credit history. If you have had problems repaying debt in the past, for example on a credit card, personal loan, or even your utility bills, you may find that mortgage lenders refuse to accept your application. This is mainly because they consider you more likely to miss a repayment or be unable to repay on time. Similarly, if you have had a County Court Judgement (CCJ) issued against you, been registered bankrupt, or entered into an Individual Voluntary Arrangement (IVA) you may find obtaining a mortgage particularly difficult; if you have very poor credit history, a poor credit mortgage could be your only option at present.

You mortgage lender will also assess your application based on the value of the property you wish to buy versus the amount you wish to borrow. If you need to borrow more than seventy-five percent of the property's selling price, your lender may offer you a deal with a higher interest rate to cover the increased risk of you missing payments. Alternatively, you may be required to assign a guarantor for the amount you borrow above this percentage.

If you have been declined for a mortgage by one lender, it does not necessarily mean that the next will also refuse your application. Ensure you compare mortgage deals from a number of lenders and use a specialist broker if you are unsure which type of mortgage would best suit your needs.

Economic Effects on Mortgages

Economic conditions affect the availability of mortgages. If the state of the economy is generally good, mortgage lenders are able to borrow more, which means they can take greater risk when lending you money. They can offer better deals and a greater variety of mortgages; essentially, it is easier to find, and be accepted for, a mortgage that suits your needs. In contrast, if the economy is in recession, mortgage providers are unable to borrow a lot of money from other banks, which means that they are unable to take risks when lending; essentially, they can only offer a limited range of mortgages and accept applications from customers who present minimal risk: those who always pay their payments on time and in full. The UK is currently in the throws of a 'credit crunch'. This is an economic situation whereby banks will not, or cannot, lend, and investors will not, or cannot, buy debts. Essentially, the current state of the UK economy is forcing mortgage lenders to adjust the deals they offer, and only accept applications from people with good credit ratings. For more information see Mortgage Crisis in the UK.