Data from the Council of Mortgage Lenders shows first time buyer numbers rose 38 per cent year on year in January 2013, fuelled by schemes like Help to Buy.
Recently though, the Mortgage Market Review’s introduction in April implies changes to the way mortgages are assessed, meaning individuals will need to take a more proactive approach to reviewing their finances. As Aldermore’s Head of Residential Mortgages Charles Haresnape explains, as an industry, mortgage lenders will now be, "Doing a more in-depth analysis of affordability."
These more stringent industry standards mean lenders will be looking beyond basic affordability measures such as salaries to also consider factors including monthly spending habits. For Aldermore, Haresnape predicts, “I don’t see any adverse impact in availability of credit for those that can afford it,” since the Bank has, “been operating largely under those procedures and those guidelines for some considerable period of time.”
Nonetheless, homebuyers must understand how to organise their finances to demonstrate to banks that they are a creditworthy mortgage prospect. This is particularly true as Experian recently discovered 72 per cent of aspiring homeowners had not heard of the MMR, with many of the remaining 28 per cent unclear on its implications.
More worryingly, the survey also found that just 23 per cent had checked their credit score in the past 6 months, and 19 per cent had no plans to prepare their finances for a mortgage application.
Responding to these findings, Experian’s Managing Director of UK Consumer Services, Peter Turner, advised: “Time spent preparing your finances now will pay dividends in the future. We’d advise potential homebuyers to look at their financial situation as soon as they make the decision to look for a home, and not just before they apply for a mortgage.” Thankfully, there are a number of ways potential buyers can prove their financial stability to improve their chances of gaining a mortgage.
Joining the electoral roll is the first step towards establishing a credit record, while reining in on non-essential spending in the months prior to applying will show lenders an ability to budget for potential future interest rate rises.
With a firmer grasp on the importance of assessing finances in the run-up to applying for a mortgage , Aldermore hopes to continue to see a growing number of creditworthy British homebuyers purchasing their first home in 2014.
The content published on this website is intended to provide information only. The reader should seek advice from experts on the subject matter and independently verify the accuracy and relevance of any information provided here before relying upon it or using it for any reason. You can view our terms and conditions here.