Aspiring homeowners are ruling themselves out of applying for mortgages because they incorrectly believe they won’t qualify, new research from Lloyds suggests.
The study of more than 1,000 prospective first-time buyers found widespread confusion about what could prevent someone from getting a mortgage. More than half (58%) believe, while over a third (37%) think a 20% deposit is essential.
Many also believe factors such as using an overdraft (40%), receiving benefits (38%), changing jobs recently (31%), not having a perfect credit score (30%) or being self-employed (24%) would put home ownership out of reach.
The findings suggest that while affordability is one of the biggest challenges facing first-time buyers, misconceptions about mortgage eligibility may be creating an additional barrier, Lloyds says – with some ruling themselves out before they’ve even explored their options.
More than a third (37%) of respondents said being rejected for a mortgage was a particular concern, despite widespread misconceptions about what could prevent someone from getting approved.
The findings come at a time when many aspiring homeowners are making significant financial and personal sacrifices to save for their first property.
More than half (53%) said they had delayed or given up important life milestones while trying to get on the property ladder, including travelling (28%), buying a car (15%), getting married (14%) and having children (14%).
Almost two-thirds (64%) said they had cut back on day-to-day spending while saving for a home, with holidays (46%), eating out (41%) and buying new clothes (39%) among the most common sacrifices.
The research also highlights how challenging many prospective first-time buyers perceive getting on the property ladder to be.
More than a quarter (27%) said learning a new language felt more achievable than buying their first home, while one in five said running a marathon (20%) or writing a book (20%) seemed easier.
Ian Harris, president of NAEA Propertymark (National Association of Estate Agents), said of the findings: “The reality is that buying a first home is already challenging, with affordability, deposits and access to suitable housing all significant barriers.
“The last thing prospective buyers need is to rule themselves out because they believe having existing debt, being self-employed, using an overdraft, or not having a perfect credit score automatically means they cannot secure a mortgage.”
He added: “However, we must also recognise the wider affordability challenge. Helping buyers understand their options is important, but it cannot on its own resolve the fundamental pressures facing first-time buyers, including house prices, deposit requirements and the cost of living.”
