Mortgage demand is ‘through the roof’ thanks to the stamp duty holiday and the rise of 95% mortgages. This means it’s more important than ever for home buyers to be ‘mortgage ready’. Here are some tips to put you in a better position
If you have been following what’s going in the property world you’ll be well aware there are currently incentives galore for anyone who wants to buy a home.
Stamp duty doesn’t apply on the first £500,000 of any property purchase until 30 June – and after that time the ‘nil rate’ still applies to the first £250,000 of the price.
What’s more, in mid-April the government will be providing guarantees to some of the big lenders so they can offer 95% loan-to-value mortgages – in other words, anyone with a 5% deposit can, if they pass criteria, take out a mortgage again.
The government’s decision to offer backing to big lenders has created a groundswell of confidence. So, while the big banks such as HSBC, Barclays and Santander, are currently going to be offering 95% loans through the government scheme, other mortgage providers have started to offer their own versions of the 5% deposit mortgage.
Most of these offerings are available via brokers – so it’s definitely working speaking to an adviser if you want to scour the market. However, it means by mid-April there will be some great options for small deposit borrowers.
So far it’s all looking good if you are a small deposit borrower – the options and incentives are most certainly out there. In fact, they are so tempting Experian reported enquiries on its mortgage comparison service increased by 14.6% week-on-week since the Budget on 3 March – when the chancellor announced the stamp duty holiday would continue and unveiled the 95% scheme.
Interestingly, growth is being fuelled by the under 30s with mortgage applications from this age group rising by 4.2% in the first two weeks of March when compared to the same period in February.
It would suggest first-time buyers are starting to return back to the market.
But, don’t get excited just yet…. there’s still the small matter of the mortgage lenders’ checks. When you apply for a mortgage, you will have your finances and income scrutinised and even if you have the required deposit, if you don’t pass affordability tests, you may still be rejected
Fortuantely, there are a number of things you can do to improve your chances of getting that all important ‘yes’ from a mortgage lender.
In fact, getting yourself mortgage-ready won’t just help you get accepted, it will also mean you could be eligible for a cheaper deal.
Experian has offered five top tips to help anyone preparing to take out a mortgage to get themselves into the best place possible before applying.
Tip 1: Know your credit score
Understanding your credit score, what it is and how it could be improved is the first step to ensuring you are in the best possible position to apply for a mortgage.
The higher your credit score, the better your chances of being accepted for a mortgage, at the best rates.
Tip 2: Check your report and ask for any errors to be corrected
Looking at your credit report will help you to see what is impacting your credit score.
They generally cover the past six years and so the sooner you are able to take control of your finances and make sure any problems you might have faced in the past (such as paying bills on time) have been sorted, the better.
If you’re applying for a mortgage, it’s a good idea to check your credit report as early as possible. Ideally, at least two months before you apply.
If you find any errors, ask for them to be corrected. A single late payment can wipe 130 points of your Experian Credit Score. Make sure your report reflects the facts.
Tip 3: Try to avoid new debt in the run up to applying for a mortgage
Try not to max out your credit card or use your entire overdraft, as lenders may think you’re in financial difficulty.
Equally, applying for credit too often can lower your score, as each application is marked even if you’re not approved.
This is called a hard search as lenders can see your application, so try to only apply for credit you’re eligible for (something you can check on Experian.co.uk).
Tip 4: Sort your savings accounts
The government has a number of savings schemes including the Lifetime ISA and Help to Buy: Shared ownership which should be explored.
It’s always best to research your savings account options to make sure you’re getting every possible penny of interest in line with the Bank of England’s interest rate.
Tip 5: See if you can boost your credit score
Experian has launched its new free service, Experian Boost, which could instantly improve your score by volunteering more information about how you manage your money.
It works by taking into consideration everyday payments to digital entertainment services, like Netflix and Spotify, and includes regular payments to things like council tax and savings.
Your score won’t go down when you sign up – and if you don’t get a boost immediately, stay connected as your score could increase overtime.
Clive Lawson, managing director of Experian Consumer Services, added: “With mortgage options continuing to steadily increase, it’s important to use a broker and eligibility services, especially for higher loan-to-value ratios, so you get the product that’s best for you.
“People with high scores tend to be able to access the best mortgage rates, so it’s worth taking some time to make sure your credit score is in the best possible shape too”.
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