Help to Buy applicants ‘alarmingly’ unprepared

Published on Wednesday, 29 January 2014 14:35
Written by Daniel Mason

Almost two-fifths of prospective homeowners aged under 40 are considering applying for Help to Buy loans this year, according to new research.

But the survey, commissioned by Experian CreditExpert, also found that many are in danger of being turned down because they are "alarmingly" unprepared.

The poll revealed that 39 per cent of 20 to 40-year-olds plan to take advantage of the government scheme in 2014 – equivalent to seven out of every 10 mortgage applications in that age group.

Under Help to Buy, the government guarantees mortgages for people with a deposit of as little as 5 per cent.

However, Experian's Help to Buy Hopefuls report found that 7 per cent of potential applicants under 40 have not saved for a deposit and, of those that have saved, 26 per cent have less than the required £5,000. The average deposit saved is £9,590.

Meanwhile a quarter have never reviewed their own credit report and 8 per cent believe a good credit history is less important for a Help to Buy loan than a regular mortgage.

In addition, only 40 per cent are registered on the electoral roll at their current address – often a key factor in passing identity checks and ensuring credit reports are accurate.

James Jones, head of consumer affairs at Experian, said that Help to Buy was "clearly proving very popular" but "alarmingly, the report shows that many people aren't really prepared to apply just yet".

"There is a misconception that because it is a government-backed scheme the criteria are reduced but of course lenders are still looking at credit scores very, very closely so you want to do what you can to make sure that your application is attractive to a lender."

He added: "It is absolutely imperative that anyone who is interested in planning to use Help to Buy to get a home in the next 12 months makes the effort to check their credit rating to make sure they are in the best possible position to be accepted."

The poll found that more men than women plan to apply, by 43 per cent to 34 per cent, and the majority are in their 20s. Three in 10 potential applicants earn less than £20,000 a year, half earn £30,000 and 23 per cent earn £50,000 or more.

The scheme is most popular among 20 to 40-year-olds in the north east of England and least popular in the south east, the report revealed.

Jones said: "There have been some really encouraging figures out this week showing that in December mortgage lending was at its strongest for the last six years so it certainly shows that lenders are willing to lend.

"But of course they are looking to lend to people who can afford to make the repayments and have showed a propensity in the past based on their credit history to make repayments on time."

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