Frozen out of the property market


Winter's Tale. Red Finnish cottage in a beautiful snow forest.

The housing market is booming again: houses are selling faster than they have for six years, and asking prices hit a record £262,594 in April - up 7.3% from a year ago. In London, Foxtons says it has seen a 20% surge in new buyers registering with the firm. It's officially boom time.

However, while a good portion of the country goes property-mad, there are significant sections of society who have been completely frozen out of the market.

Precise Mortgages identified four key groups of people who are struggling to get a mortgage, and finding it impossible to get on the property ladder.

1. Small deposits

The first group of the disenfranchised are those who have a small deposit. More than half of those surveyed said it was still too difficult for someone with a small deposit to get a mortgage.

This was certainly the case until last March, when George Osborne announced the Help to Buy scheme specifically to help this group of people. The government says that more than 17,000 households bought homes under the scheme in the first nine months of its operation.

However, the scheme requires a high degree of credit worthiness, so there are still significant hurdles to overcome in order to access government assistance.

2. First-time buyers

The second group is first-time buyers: around 40% of people say it's too hard for first-time buyers to get a mortgage.

To some extent Help to Buy has been a boon for this group. The government says that 88% of those who have been helped by the scheme are first-time buyers. This is reflected in figures which show that 22,200 first-time buyers received a mortgage this February - up 41% from a year ago.

However, this group is still hard-pressed to afford a home of their own, typically because of a combination of small deposits, relatively low incomes and high house prices.

Things are set to get even tougher for them later this month, as the Mortgage Market Review will kick in, meaning that lenders will use affordability calculators to test whether you can afford repayments. For younger buyers on smaller incomes it will be hard to prove that they earn enough to make a purchase viable.

3. Self-employed people

A fifth of people say that borrowing is too difficult for this group. Before the onset of the financial crisis, it was possible to self-certify a loan by declaring your own income. However, self-certified mortgages have since become known as liar-loans, as people were creative with the truth in order to borrow more. In the wake of the crisis they died a swift death, and they will officially be banned outright at the end of the month.

If you have been self-employed for less than three years then you have very little chance of being accepted for a mortgage by the vast majority of lenders. A broker who deals with specialist lenders may be able to help, but you're likely to pay a far higher interest rate as a result.

If you have three years of self-employment behind you, you can use proof of income over those years in order to apply for a mortgage. However, whereas before the crisis lenders would often allow you to apply for a multiple of your best year, many will now only allow you to apply for a multiple of the average of the previous three years

4. Those with blemished credit histories

Another fifth of people think that borrowers who have had debt problems in the past will struggle to get a mortgage.

This is certainly the case where an individual still has a significant chunk of debt outstanding, as lenders will be concerned about the total level of debt. It may also be a problem if you have had debt problems in the past - and missed payments on debts or significant bills. Serious problems such as a former bankruptcy or repossession will make getting a mortgage incredibly difficult.

It's worth checking your credit record for any problems before you consider applying for a mortgage. If there are significant issues on there, you can improve your credit record over time by paying down debts and sticking to repayments.


For each of these groups, time will undoubtedly overcome many of these issues. In time you can save for a deposit, your salary is likely to increase, you can get a decent record of self-employment, and you can prove your credit worthiness.

The trouble is that in a market which has risen 7% in a year, there's a chance that waiting to overcome your problems is going to mean that in the interim, property prices rise even further out of reach.