UK mortgage rejections up 60%
The number of people who have had mortgage applications turned down in Britain has soared by 60% during the past six months, figures showed today.
A total of 738,000 home loan applications were turned down by lenders during the six months to the end of September as mortgage firms tightened their lending criteria.
This compared with only around 463,000 mortgage applications that were turned down during the previous six months, according to financial website MoneyExpert.com.
Young people were most likely to have a mortgage application rejected, with those aged between 25 and 34 accounting for half of all people who were turned down.
The group said consumers were being hit by a combination of higher interest rates and tighter lending criteria among mortgage companies.
It said with interest rates rising five times since August last year, someone with a £150,000 (€215,319) mortgage will have seen their annual repayments rise by around £1,320 (€1,895), stretching affordability.
At the same time lenders have become more reluctant to advance people high multiples of their salaries, or to lend to people with small deposits.
Sean Gardner, chief executive of MoneyExpert.com, said: "Life is tough at the moment if you're applying for a mortgage.
"The financial environment is far more stringent than in the summer of last year and people need to be prepared for rejection.
He said that while the rise was likely to be affected by seasonality as the summer is the peak period for mortgage applications, as it is also the most popular time of year for people to move home.
But he added: "Interest rate rises are also a major factor over both periods of our research - there have been four rises in November 2006, January, May and July this year - which is bound to have boosted application rates.
"We will however continue to monitor these trends so that we can establish the severity of the problem over time."
The group said that with so many people having mortgage applications turned down, it was unlikely that only first-time buyers were being affected.
It said anyone looking to remortgage should take professional advice if they were unsure, as too many failed mortgage applications could affect their credit rating.
Meanwhile The Intermediary Mortgage Lenders Association (IMLA) said the fundamentals of the UK mortgage market are sound and conditions are slowly returning to normal.
Peter Williams, executive director of IMLA, said: "The turmoil in the financial and mortgage markets was attributable not to an actual problem with the credit quality of UK mortgage books, but concerns among investors that UK lenders could encounter the same problems as have occurred in the US.
"That ignored the fact that the credit quality of UK mortgages remains very good."
He said across the board arrears and repossession levels remained low, while people's jobs remained secure, the Libor index, on which some mortgage rates are based, is stabilising and interest rates look set to come down.
At the same time there is a renewed appetite among investors to buy up bundles of UK mortgages.
He said: "While fully acknowledging the difficulties that do exist, a wider recognition of positives would go a long way to help the market move forward.
"It is clear we are seeing the start of a return to normality, with investors and consumers realising that the fundamentals of our market are solid and that there is no reason to stay out any longer."
