Help to Buy hopefuls are 'unprepared' for the scheme

Almost two fifths (39%) of 20 to 40-year-olds are planning to apply to the Government’s Help to Buy mortgage scheme in 2014, according to a report commissioned by Experian CreditExpert.

Related topics:  Mortgages
Amy Loddington
23rd January 2014
Mortgages

However, some of these Help to Buy hopefuls could well be ill-prepared, with just two fifths (40%) being registered to the electoral roll at their current address – something that can be a key factor not only in passing the initial identity verification checks but also in ensuring your credit report is accurate as possible.

Furthermore, the insight report also found that a quarter of would be Help to Buy applicants have never reviewed their own credit report and 7% have not saved for a deposit.

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% looking to move in the next three months.

The report found that more men than women (43% to 34% respectively) are planning on applying for the scheme, with the majority in their 20s, with 33% aged 20-24 years old and 31% 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

People in the North East are most likely to be considering Help to Buy (50% of 20-40-year-olds), followed closely by London (49%) and the West Midlands (46%). People in the South East (33%) and the South West (30%) are least likely.
   

25% of Help to Buy hopefuls have never checked their credit report to better understand how their history of managing credit could impact their application for the scheme. But two-thirds (64%) have checked their credit report within the last year and a third (31%) in the last three months

One in seven of those looking to buy (14%) admit they have been managing their current credit accounts poorly in recent years A further 14% think that having a good credit history is less important for Help to Buy than for conventional mortgages – when the opposite is likely to be true

Londoners have the largest deposits, with 53% having £10k or more and 19% more than £20k. Just 1% 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

Peter Turner, Managing Director, Experian Consumer Services, UK & Ireland, commented:

“Help to Buy has brought homeownership to within touching distance for thousands of younger buyers earlier than they may have dreamt possible. But it’s important to remember that the deposit is only part of the equation and consideration must be given to how much you can afford to borrow – and crucially repay in the years to come.

“A larger loan means lenders taking close look at your ability to repay and a large factor in that will be based on your credit history. Anyone looking to make the most of Help to Buy would be well advised to check their credit report to better understand their credit history, and ask for help if needed to ensure your credit report paints the best possible picture – before you make your application.

“Hopefuls should also note that in the short term, future applications for credit could be negatively impacted as lenders may want to see how well you are repaying your current credit commitments before offering you any more credit. Take this into account in your financial planning for the year ahead and, where possible, give the mortgage time to mature before making any future applications.”

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