Many prospective homeowners hoping to take advantage of high LTV lending through Help to Buy are ill-prepared for the scheme, a report by Experian CreditExpert has found.
Almost two fifths (39 per cent) of 20 to 40 year olds are planning to apply to the government scheme this year, according to the report, but just two fifths have registered to the electoral roll at their current address, which can be key to passing the initial identity verification checks and ensuring the credit report is accurate.
The insight report also found that a quarter of would-be Help to Buy applicants have never reviewed their own credit report and 7 per cent have not saved for a deposit. In fact, more than a quarter (26 per cent) has saved less than the £5,000 required to partake in the Help to Buy scheme.
The Experian Help to Buy Hopefuls Insight Report, based on interviews with more than 2,000 20 to 40-year-olds, also reveals that Help to Buy hopefuls account for seven in 10 potential mortgage applications among the under-40s.
A quarter of Help to Buy Hopefuls will apply in the second half of 2014 with 7 per cent looking to move in the next three months.
Who are the Help to Buy Hopefuls?
- More men than women (43 per cent to 34 per cent respectively) are planning on applying for the scheme
- The majority are in their 20s, with 33 per cent aged 20-24 years old and 31 per cent aged 25-30
- Their household income varies widely. Although three in 10 (29%) earn less than £20k a year, half earn more than £30k. Nearly a quarter (23%) enjoy a household income of twice the national average at £50,000 or more
Where do Help to Buy Hopefuls live?
- People in the North East are most likely to be considering Help to Buy (50 per cent of 20-40-year-olds)
- This is followed closely by London (49 per cent) and the West Midlands (46 per cent). People in the South East (33 per cent) and the South West (30 per cent) are least likely.
Financial Matters:
- The average deposit saved by Help to Buy Hopefuls is £9,590, but 7 per cent have yet to save anything
- The majority (55 per cent) have a deposit of less than £10k, with 19 per cent less than £5k. Three in 10 (30 per cent) have £10-20k set aside while one in 10 (11 per cent) have more than £20k.
- Men are more likely to have larger deposits than women (47 per cent have more than £10k compared to 33 per cent of women)
- Londoners have the largest deposits, with 53 per cent having £10k or more and 19 per cent more than £20k. Just 1 per cent have no deposit, compared to 14% of those in the East Midlands
- Help to Buy Hopefuls currently owe an average of £4,600 in other borrowing
Here are some simple tips from Experian CreditExpert to help you prepare for a mortgage application in 2014:
- Understand what is on your credit report before you meet any lenders. Is everything accurate and up-to-date? Pay attention to addresses, whether you’re listed as being on the Electoral Roll at your current address, financial associations which are no longer relevant and or outstanding accounts that should be marked as settled.
- Does your Experian Credit Score need work? The Experian Credit Score is a guide, to help you understand your credit report, how past credit management can impact on future credit applications and for you to monitor your progress as you get your finances in order before you apply.
- Shopping around? Decide what kind of mortgage you want, how much you can afford and compare products you are likely to qualify for. Experian CreditExpert matches your credit profile to the best deals you are most likely to be accepted for. Only when you’ve found the best deal should you ask for an agreement in principle.
- Do you want a quote or an agreement in principle? A quote will tell you what mortgage rate you’re likely to get and what your repayments would be but do not require a full credit check. An agreement in principal will tell you if a lender will offer you a certain size of mortgage and is treated as an application and will leave a footprint on your credit file. Too many footprints could cause future lenders to be concerned you have been rejected for previous applications
- Remember your credit report is only one part of your application. Lenders also use the information provided on your application form and that they already hold on you (if you’re applying through your bank, for example).
