One in 10 Private Renters Have Had Mortgage Applications Declined

While most private renters continue to share the dream of owning their own homes, getting on the UK property ladder is becoming an increasingly unlikely prospect for many. Along with record-high property values pricing millions out of the market entirely, difficulties qualifying for mortgages are plaguing would-be first-time buyers. 

New data published by Canopy suggests that at least 10% of private renters have had a mortgage application denied on the basis of poor financial health.  Among those who were unable to qualify for a mortgage, 24% could not come up with a big enough deposit, 25% had an inadequate credit score, 13% had too much existing debt and 15% had at least one payday loan on their credit report.

The figures also revealed that 27% of private tenants have no idea what their credit score is, despite it being a ‘binary’ qualification factor with the vast majority of mortgage providers.

On average, those who took part in the Canopy survey were paying £753 per month in rent – more than enough to cover the monthly repayments on a competitive mortgage. Given how research suggests 80% of private tenants never miss a monthly rent payment, this would indicate that most are in a stable enough financial position to afford a home loan.

But as lenders make it increasingly difficult to qualify for a mortgage; dreams of home ownership are becoming increasingly farfetched for many. 

Cost-of-Living Crisis Hits Households Hard

Speaking on behalf of Canopy, a leading private rental platform, CEO Chris Hutchinson highlighted the difficulties being faced by private renters plagued by unprecedented living cost increases:

“With the current cost-of-living crisis, it’s an incredibly tricky time for renters and aspiring homeowners,” he said. 

“Their day-to-day living is going up and saving spare cash at the end of each month for a future house deposit will feel like an impossible task, and quite frankly not a priority as they look to make ends meet,”

“It is, therefore, more important than ever that time spent renting is used to improve financial fitness. Our research has made it clear that the vast majority of renters are reliable, consistent tenants who honour their financial commitments, yet they can’t get a mortgage,”

“Renters need to be tracking these rent payments so that they can improve their credit score throughout their renting journey and ultimately put themselves in the best position possible when they apply for a mortgage. Having an edge over the competition will prove invaluable.”

The news comes as separate data indicates the highest price ever rental cost increases in the UK in 14 years, making it increasingly difficult for cash-strapped private tenants to make ends meet.

However, there are those who believe that a gradual slowdown will begin to creep into the equation, before the year is out.

“The surge of post-pandemic pent-up rental demand will normalise through Q2 and Q3 however, which means rental growth levels will start to ease,” said Gráinne Gilmore, head of research at Zoopla.

“Affordability considerations will also start to put a limit on further rental growth although this may occur at different times depending on location,”

“Rents are likely to continue rising for longer in areas which have the most constrained stock levels — currently London, Scotland and the South West.”