16 Jun 2023

6 ways to improve your chances of getting a mortgage

Mortgage approvals have slumped - is there anything first-time buyers can do?

The number of new mortgages being approved is down by a quarter compared with last year, according to new figures from the Bank of England.

It says a total of 48,690 mortgage applications for house purchases were approved in April 2023, down 5.4% from March when 51,488 got approved and down 26% compared to April 2022 when 65,759 went through.

Experts believe higher interest rates on mortgages are behind the drop as buyers try to work out what they can afford.

Here, Which? reveals six things you can do to help make your dream of home ownership a reality in a turbulent market.

Six ways to improve your mortgage chances

Here are our top tips on making yourself more attractive to lenders and securing a loan for your first property.

1. Improve your credit score

Lenders will check your credit report when you a pply for a mortgage, so it's important the information it contains is correct.

Errors or a lack of information can lead to a low credit score and that means you're more likely to be turned down when you apply for a mortgage.

Making sure you're on the electoral roll, cutting financial ties with ex-partners and using a credit-builder credit card can all help boost your score.

Find out more: 16 ways to improve your credit score

2. Save a bigger deposit

Unless you're taking out a guarantor mortgage or a rare 100% home loan, you'll need at least 5% of the property price to be given a mortgage. But if you save more, you'll be able to borrow at a lower loan-to-value ratio (LTV), which usually means being offered a lower interest rate.

Leading fixed rates for a 5% deposit are currently priced around 5.2%, while the best for a 10% deposit is around 4.8%. The difference may look relatively small on paper, but in reality you would save £564 a year by opting for the second option if you were repaying a £200,000 loan across a 25-year period.

According to Halifax, the average deposit put down by first-time buyers in 2022 was £62,470. Outside of London, the average was £44,148.

If you're a first-time buyer planning at least a year in advance, a lifetime Isas is a good way of upping your deposit.

The tax-free savings or investment account is designed to help first-time buyers aged between 18 and 39. It offers a 25% bonus, with the government paying up to £1,000 a year if you save the maximum amount of £4,000.

Find out more: how to save for a mortgage deposit

3. Cut back on bills and everyday spending

Lenders are likely to want to see your bank statements to get a good idea about your outgoings, so you may want to be frugal with your finances in the lead-up to buying a house.

Check to see if you can cut the cost of bills for broadband, your mobile phone, insurance and TV. Then see if there are savings to be made on other outgoings such your gym membership or music streaming service.

Services such as Which? Switch allow you to compare prices and find new deals that could end up saving you hundreds of pounds a year.

Find out more: 50 ways to save money

4. Talk to a mortgage broker

It's worth speaking to a whole-of-market mortgage broker, who will be able to estimate what you can afford to borrow and, once you've found a property, will be able to search a wide range of available deals to find a mortgage that suits your circumstances.

They can be especially useful if you have specific circumstances that could affect your mortgage chances, for example, if you're self-employed, have a small deposit, or have a history of credit issues.

Find out more: how to choose a mortgage broker

5. Get your paperwork in order

Lenders will ask to see a range of documents when you apply for a mortgage.

You'll likely need to provide proof of ID, proof of your deposit, three months' of payslips and up to six months' of bank statements.

If you're self-employed or have income from other sources the list is likely to be longer.

Find out more:mortgages for self-employed buyers

6. Bide your time if rejected

A mortgage rejection will leave a mark on your credit file, and this will be visible to other lenders who you apply to in the future.

Most lenders pay closer attention to credit applications made in the last six months, so if you've had a mortgage application refused, you may need to spend time building your credit rating back up.

Don't rush into making several mortgage applications very close together as this could significantly damage your credit score. If rejected, make sure to find out the reasons why so they can be rectified.