Mortgage application rejections at 60%

According to new research from MoneyExpert.com, 60% of mortgage applications have been turned down during the past six months, as a result of lenders tighten their loan criteria and the increase in interest rates.

Five Bank of England base rate rises in 12 months have taken the base rate from 4.5% to 5.75%.

This has impacted on homebuyers’ already stretched affordability making fewer potential borrowers eligible for loans.

Interest rate rises alone have added approximately £1,320 to the annual cost of a typical variable rate mortgage of £150,000.

The MoneyExpert figures show that over 738,000 home loan applications have been rejected since March, as compared with 463,000 during the prior six month.

Applicants between the ages of 25 and 34 have been most affected by rate rises and stricter lending criteria, with 4% of this group of potential borrowers having their applications turned down.

In October 2006 house prices were 20% less than today; prices have increased by around 10% in the past 12 months.

This level of inflation has impacted on the number of first-time buyers seeking to get a foot on the property ladder but the number of applications rejected in the past six months indicates that large numbers of homeowners are also being affected.

MoneyExpert is warning those wishing to remortgage to do their homework and take professional advice if necessary, as failed applications can affect people’s credit histories.

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