Lenders are refusing to grant mortgages to homeowners for the most spurious reasons. A bank customer had his application rejected because he had gone over his overdraft limit by only 30 pounds. The application of another potential mortgagee was rejected because they had an unpaid parking ticket. This misdemeanor had resulted in him acquiring a County Court judgment, which left him with a blemish on his credit history.
Similar cases have involved people being turned down for credit by lenders, because they are being chased for disputed mobile phone bills. People reaching the end of mortgage deals are particularly at risk, as the most trivial incidents can tarnish their credit record... They may not pass the credit searches instigated by the lender and consequently will not be offered a loan.
A member of Savills Private Finance, the mortgage broker, says lenders are going through credit files with a fine tooth comb to find trivial excuses to reject a mortgage application. It is almost as though they are looking for any excuse not to lend, she says.
Although many major banks, have received cash from the taxpayer exceeding 100 billion pounds, they are steadfastly refusing to pass on this cash to revive the housing market, which has led to a frightening collapse in the house prices. People with minor blemishes on their credit record are being rejected, despite empty promises made by the banks that they would resume normal trading.
The practice of automated credit checking by the large banks and building societies to weed out undesirable customers has gone too far. It was only a year or two ago that banks were throwing money at people recklessly, without even checking whether the potential customer had the ability to repay. The madness of self-certification home loans, where no proof of income was required, boomed just a short time ago. Then there were the totally irrational schemes, which increased the amount that could be lent to five, or even six times, the income of the buyer. Now the boot is on the other foot, as mortgage brokers claim that lenders are rejecting applications for virtually no reason at all. What a mad, mad world we live in!
At the same time, in spite of unprecedented cuts in the base rate, we are having to pay higher interest rates on credit cards and personal loans.
So how can you become a perfect borrower? - Here are a few of the gold stars that you need to earn to become a perfect borrower in the eyes of the high street lenders.
You must be a house owner, be on the electoral role, have your own phone line, married, have no late payments on loans, pay off at least a couple of credit card bills each month, have no past financial problems, be up to date on your store cards, be fully employed...etc...etc...
Statistics show that 20 per cent of applicants in the UK have had difficulty in obtaining credit. Your past financial history can have a big impact on the amount you will have to pay and whether you will be able to obtain credit.
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