Despite the recent lack of mortgages for first time buyers with small deposits, lenders have approved mortgages at the fastest rate since August 2007. The Bank of England released figures showing 104,969 mortgages were approved in November, versus economists’ predictions of 82,500 – and all of this in the month that the Government implemented the second national lockdown in England.
During the first coronavirus lockdown, mortgage borrowing plunged as the UK economy fell into the deepest recession for 300 years, with mortgage borrowing hitting a low of just £200m in April. In stark contrast, borrowing soared to £5.7bn in November, up by £1.2bn from the level in October. The high uptick in approvals has largely been driven by the stamp duty holiday that was brought in by the Chancellor in Summer 2020 in response to the shutdown of the housing market during the first lockdown.
Give the deadline of March 2021 to qualify for the tax break, many would-be purchasers rushed to take advantage of the saving in the latter half of 2020, leading to the surge in mortgage applications. The reason the mortgage approval rate has been so high is purely down to the increase in volume of mortgage applications in the weeks leading to November.
So, how does this impact on potential mortgage borrowing in 2021? There are certain basic factors that all potential borrowers can take heed of that will drastically improve the chances of a successful application. Unsurprisingly, most of these involve managing your credit in a sensible way.
Check your credit report
It’s important that your credit report shows the correct information, and if it isn’t correct, challenge the data held in it. You should also ensure you’re familiar with any ‘blips’ on your report, i.e., late or missed payments; and ensure you disclose these to your mortgage adviser.
Reduce your outstanding credit
If you have an overdraft facility, stay out of it for the 3 months leading up to your mortgage application. Ideally, live within your means and only use it for emergencies. Also, settle any other debts like credit cards and loans if it is affordable to do so.
Applications for credit
Don’t make new applications for loans or new credit cards in the lead-up to a mortgage application. In simple terms, lenders don’t like increased indebtedness when there’s an even bigger debt application on the way with the mortgage.
Use a reputable broker
This one is really important, as if you get a mortgage application wrong when dealing directly with a lender, it gets registered on your credit report and can be disastrous for any subsequent applications. The broker acts like ‘quality control’ for any information you need to supply, and will only approach lenders who view this sympathetically.
The advisers at Smartr Finance have been assisting mortgage borrowers successfully for many years, and know how to navigate lending criteria to source the most competitive rates for most circumstances. Use the Free Quote button to make an enquiry today.