Mortgage approvals on the up
Are home buyers becoming more savvy?
The latest data on mortgage approvals from UK Finance1 shows a turn-around from the four-month low experienced at the end of 2017. In January 2018 there were 40,117 approvals for house purchases, compared to just 36,085 in December 2017. Lisa Hardstaff, credit information expert at Equifax, wonders if the upturn in mortgage approvals is an indication of homebuyer savviness about the application process, and if it also reflects consumers making the most of mortgage deals on offer at the end of last year.
“The reality is that mortgage lenders take a good look at a person’s financial situation when assessing an application,” said Lisa Hardstaff. “This includes looking at information on their credit report.
“If they have missed or made a late payment on a credit or service agreement, this could be a cause for concern for prospective lenders. Also, having too many credit agreements could indicate that a person is financially overstretching themselves. Too few, however, and a lender may find it difficult to assess how the person will perform when it comes to repaying their mortgage.
“We suggest that anyone considering applying for a mortgage should check their credit report at least six months before submitting their application. This will enable them to ensure that any changes that might need to be made – such as updating their electoral registration or making sure the report data is correct – are done before they make a mortgage application.
“The start of the mortgage application process is also a good time to review how current credit commitments are being managed. This is so that a pattern of good financial behaviour can be established to help an individual make a successful application at the desired interest rate and loan amount.”
Lenders also have a duty to assess the long-term affordability of an applicant. Affordability checks are designed to make sure the applicant can afford the repayments both now and in the future. The checks will also take into consideration potential interest rate increases, as well as significant life events that may affect future repayments. Borrowers should therefore expect to be asked a range of questions, including those about their spending habits, any childcare costs and future financial plans.
To find out more about getting mortgage ready visit the Equifax Knowledge Centre.
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