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Mortgage borrowers who have loan applications rejected when they have directly approached lenders should consider looking for help from a mortgage broker.
Many borrowers are turned down for a loan at the first attempt because they do not know how to ‘package’ themselves as an attractive prospect for a lender, according to a study by financial services provider Legal and General.
The mortgage market has a pent up demand of around 3.4 million potential borrowers seeking a home loan in the next 12 months.
Around 2 million prospective borrowers are holding back from approaching lenders because they have no confidence their applications will succeed.
Around 1.1 million are concerned bad credit might affect their chances of approval, 2.8 million think they don’t earn enough and 2.3 million consider they do not have enough deposit to buy a home.
Few of these borrowers approach mortgage brokers, says Legal and General, because they do not realise they can help – although 44% of those wanting a mortgage would use a broker if they knew how.
Ben Thompson, managing director of Legal and General’s mortgage club, said: “Many borrowers don’t realise that chasing the headline rates that high-street lenders advertise may lead them to making multiple attempts at securing a mortgage.
“More than half of all borrowers say they would apply for a mortgage directly with a high street lender with the majority doing so purely because they have an existing relationship with one rather than because they knew they offered the most appropriate deals.
“It’s clear that borrowers would benefit from professional, impartial advice that will potentially open up a lot more financing options for them and brokers have a golden opportunity to tap into this part of the market.”
Analysis of the qualifying criteria for mortgages shows that high street lenders would reject most of the applications from the 2.3 million who have a 5% deposit or less. These borrowers have only 2% of the products on the market to choose from and pay the highest interest rates.
When income multiples and credit scores are considered, the choice of products reduces even more.
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