Many aspiring homeowners could be delaying their plans to get on the property ladder because they mistakenly believe they wouldn't qualify for a mortgage, new research from Lloyds suggests.
The study of more than 1,000 prospective first-time buyers found widespread confusion about what could prevent someone from getting a mortgage. More than half (58%) incorrectly believe having existing debt would automatically stop someone being approved, while over a third (37%) think a 20% deposit is essential.
Many also believe factors such as using an overdraft (40%), receiving benefits (38%), changing jobs recently (31%), not having a perfect credit score (30%) or being self-employed (24%) would definitely put homeownership out of reach.
The findings suggest that while affordability is one of the biggest challenges facing first-time buyers, misconceptions about mortgage eligibility may be creating an additional barrier, with some ruling themselves out before they've even explored their options.
Are first-time buyers putting their ambitions on hold?
The research suggests many prospective first-time buyers may be putting their ambitions on hold unnecessarily.
More than a third (37%) said being rejected for a mortgage was a particular concern, despite widespread misconceptions about what could prevent someone from getting approved.
More than half (53%) said they had delayed or given up important life milestones while trying to get on the property ladder, including travelling (28%), buying a car (15%), getting married (14%) and having children (14%).
The research highlights just how challenging many prospective first-time buyers perceive getting on the property ladder to be. More than a quarter (27%) said learning a new language felt more achievable than buying their first home, while one in five said running a marathon (20%) or writing a book (20%) seemed easier.
Amanda Bryden, head of mortgages at Lloyds, said: "Buying your first home can feel overwhelming, especially when you're trying to save for a deposit while balancing everyday costs and other life goals.
"Our research shows many aspiring first-time buyers believe they need to be debt free, have a perfect credit record or save a 20% deposit before they can even think about getting a mortgage.
"In reality, mortgage decisions are based on a much broader picture of your finances and circumstances. While affordability is important, don’t rule yourself out because of misconceptions about what lenders look for.
"This isn’t something people need to navigate on their own. Speaking to a mortgage adviser or broker early on can help you understand what options are available. Many people are surprised to find they're in a stronger position than they expected."
