Mon, 22 Oct 07
The number of rejected mortgage applications has surged by almost 60 percent over the past six months, new figures show...
A total 738,000 home loan applications were rejected in the half-year to October as interest rate rises started to bite and borrowers came up against tougher lending criteria, according to research by price comparison service MoneyExpert.com.
That is up 59 percent on the previous six months. The Bank of England has hiked the base rate five times since August 2006. Interest rates have risen to a six-year high -- from 4.5 percent to 5.75 percent -- with two quarter-point increases being pushed through since May.
The increases have added around 1,320 pounds to the annual cost of a typical 150,000 pound variable rate mortgage. At the same time, lenders have been tightening their lending criteria in the wake of rising bad debts and a global credit crunch that has rattled financial markets and plunged mortgage bank Northern Rock into turmoil
Tougher lending criteria
Applicants aged between 25 and 34 have been the worst affected, according to the research: around 382,000 young mortgage applicants were refused a loan in the past six months. But Sean Gardner, chief executive of MoneyExpert.com, said tougher lending criteria is also hitting those re-mortgaging.
He warned that a string of failed applications could hit people's credit rating and urged them to "apply with caution". "Life is tough at the moment if you're applying for a mortgage," he said.
"The financial environment is far more stringent than in the summer of last year and people need to be prepared for rejection. Lenders, quite reasonably, do not want to take risks when there are pressures on how much people can afford, so it's up to the applicant to convince their bank that they can cope with the repayments."
The figures are based on a poll of 1,009 adults undertaken by TNS.
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