A new study from The Mortgage Lender (TML) reveals that 25% of UK adults have no clear understanding of when they would be ready to apply for a mortgage, even if they had the necessary deposit.
The research looked at what consumers perceive as their readiness for mortgage application. Leading the criteria, 27% of respondents indicated that having a steady and secure income made them ready. Closely following was full-time employment, cited by 26% of those surveyed. A further 23% believed that saving enough for a deposit signalled their readiness for a mortgage application.
Other factors considered important for mortgage readiness included having a satisfactory credit score (18%), being debt-free (17%), and having a partner with a sufficient income (14%). Interestingly, only 11% identified consulting with a mortgage broker as an indicator of readiness.
When participants were asked to envisage their state of readiness, given they had a deposit in hand, responses varied. The concept of being ‘mortgage ready’ was defined as knowing one’s financial position, having the capability to make monthly payments, having all necessary documentation, being registered on the electoral roll, and clearing all outstanding loans or credit cards. While 10% believed they were mortgage ready immediately, 12% felt it would take over a year to reach this point. Meanwhile, 13% were unsure of the timeframe required to be mortgage ready.
With 17% of participants admitting to previous mortgage application rejections, the results raise concerns about the level of preparedness among prospective borrowers entering the mortgage process.
Sara Palmer (pictured), distribution director at The Mortgage Lender, said: “Buying a home is one of the biggest financial commitments a person can make and is not a decision to go into blindly. There are many steps to the mortgage process, both from a consumer and a lender perspective, and to help the process run as smoothly as possible it’s important all parties are confident they are fully ready when it comes to an application.
“This is particularly the case as it becomes more challenging to get onto or move up or down the property ladder.”
“A mortgage broker or lender can play an important role in helping consumers understand what is needed to be mortgage ready, and there are benefits to reaching out to them early. This can subsequently help ensure an application progresses as efficiently as possible and in a timely manner. Specialist lenders also have a pivotal role in supporting prospective homeowners, particularly those who may think they can’t get on the property ladder.”
