/ Home & Energy, Money

Computer says no to owning your own home

Fingers on sketch of home

They say that an Englishman’s home is his castle, but with mortgage lending hitting a 14 month low in September 2014, are we seeing a shift that means owning a home is fast becoming a pipe dream?

Some may say a decline in lending isn’t necessarily a bad thing: house prices have continued to rise way beyond earnings, and in a less financially secure economy it’s important that banks only lend to those who can really afford it.

But what about those who can afford it, who come prepared with earnings and a deposit well within requirements, but find that the computer still says no?

Unfortunately there is still a certain stigma attached to being denied any kind of loan, and those who have been refused a mortgage can be reluctant to make their voice heard. Since stricter rules have come into place more and more people are being turned down, but sometimes this is for reasons that appear to be more closely aligned to ticking boxes than evaluating suitability.

Refused a mortgage?

I’m not referring to cases where a review of an individual or their circumstances shows that they can’t afford the mortgage, or would be hard pressed to afford it in the future should their personal circumstances change, or interest rates rise. I’m talking about cases that we help applicants through regularly at Which? Mortgage Advisers which, to your average person, don’t seem to make sense, such as:

  • First time buyers and home movers who already pay more per month on their existing mortgage or monthly rent than they would on their new mortgage, but are refused
  • People who have become self-employed and now earn more than they did previously, but cannot remortgage or buy a new property
  • Over 50s who have significant amounts of capital in savings and investments and can easily pay for a mortgage, but are denied

The reasons for rejections for the groups can be as seemingly minor as not being registered correctly on the electoral roll (a question of records being updated) to having missed a credit card payment. One of the most frustrating reasons, however, is not having bad debts, but not having debt at all: by not having a credit card you can be perceived as a bad credit risk.

Whilst its obviously important that mortgage lenders are careful who they choose to lend to, they should ensure that rules designed to protect the consumer are applied with not only transparency, but also common sense?

Have you ever been refused a mortgage for a seemingly unfair reason? Do you know of someone struggling to find a lender even though on paper they can easily afford the property?


It is not only lenders who are responsible for cooling the housing market. Big developers are now selling off plan which works very well for them from a financial aspect and also for first time buyers who are lucky enough to secure a mortgage. If however you have a house to sell, developers will not accept a deposit unless you (a) have your house on the market and (b) have a prospective buyer in tow.

One of the first things an interested buyer will understandably want to know is an approximate moving in date. You have guessed it; the developer is calling the shots here. If building plans are held up for whatever reason, (and they are never short of an excuse) you either have to hope that your buyer will hang on and not put you under pressure to finalise on the sale, or you have to arrange temporary accommodation and pay for all your goods and chattels to be put into storage. Should you be in a position to proceed and put down a deposit and your buyer pulls out of your sale, you stand to forfeit a percentage of the deposit you relinquished to the developer.

If on the other hand you are in a position to go ahead with your purchase before selling your home, you will be expected to put down an immediate deposit and complete within 28 days irrespective of whether your purchase is ready to move into and you could be left out of pocket, with a house to sell and all the financial outlay that goes with it.

People of retirement age in particular who are looking to downsize would maybe hesitate to even contemplate this and decide at the end of the day to stay put and spend their money on renovating their existing home.

If big developers would consider the needs and requirements of prospective buyers a little more they might sell a few more homes.

Bryan Davis says:
5 January 2015

Since I retired I have on several occasions been told that neither my pensions, nor my income from savings can be used to calculate what I can borrow, even when I ask to borrow much less than 50% of the house value. Using income from my job (which I could lose tomorrow) seems far, far less secure than a pension of income from savings/investments (which, by the way, can go UP and for me they always have done over the long term, which is what a mortgage is usually about).

Thought for the day: Some people are retired and they work!

With the demand for home ownership declining is it not time for a study to assess the cost of successive governments’ schemes for promoting it – right-to-buy, mortgage interest tax relief, exemption from capital gains etc etc – and whether these have been good value for money?

In the 1970’s I was heavily involved in “municipalisation” (then promoted by the government) at a London Borough. The idea was to buy properties to create more rented homes. The maths behind the policy was that the cost of a typical local home required a mortgage for more than the typical local salary could support so a sufficient supply of suitable rented homes had to take priority over owner occupation.

This was abandoned and replaced with a system of home ownership promotion based on unsustainable lending. We live with the results of this.

Is home ownership a holy grail or poisoned chalice? Lt us draw breath and seek answers.

Landlords will expect a decent return on the cost of the house purchase, so a commercial rent will often be similar to mortgage repayments – so why not promote purchasing where at least you are going to get the benefit of the asset you’ve purchased, rather than your landlord?

Where Local Authorities could score is in providing rented housing for those unable to buy and unable to pay commercial rents. But they should be short-term lets so if the tenant’s situation improves they can relinquish the property to another needy person.