As part of the study people were quizzed on which personal or financial situations may impact on their ability to qualify for a mortgage from their bank.
While most consumers realised that being bankrupt (75%), or having CCJs (75%) could prevent them from getting a ‘main stream’ mortgage, other potential hurdles were not recognised.
Fewer than 50% realised that missed credit card payments could hinder a mortgage application. While every lender has their own policy on this issue, as few as three missed credit card payments can mean that a consumer is not eligible for a standard mortgage loan.
In addition, only 23% of consumers realised that being self-employed could impact on their ability to secure a regular mortgage. Without detailed records of accounts and tax returns, anyone who is self-employed is likely to struggle to borrow from their bank.
Mortgage credit myths appear to be rife with 35% of consumers believing that their bank may reject an application due to a ‘family history of debt’. In fact, this would only be the case if the relative with the bad credit history lived at the same address as the mortgage applicant, and even then steps can be taken to distinguish household members as separate financial customers to avoid any problems.
Other misconceptions included those who thought that being a divorcee (18%) or having an unemployed spouse (13%) would prevent them from obtaining home finance.
Nicola Severn, marketing manager at Beacon Homeloans, commented: “This research shows that more needs to be done to educate consumers about the non-conforming market and the effect an individual’s financial status has on their ability to borrow.
"The fact that consumers believe such ‘mortgage myths’ is very worrying. For example, an unemployed spouse really does not impact on an individual’s creditworthiness. Nor does a ‘family history of debt’ necessarily mean the end to your mortgage hopes.
"On top of the serious lack of education that this research highlights, it also shows just how crucial it is for all consumers to use an IFA. Good independent financial advice is vitally important in the mortgage decision-making process and we hope that as consumers grow more financially sophisticated, they realise this and make use of the services available.”
