With the property market bouncing back, a growing number of people are seeking affordable mortgages. Mortgage rates fell to record-breaking low levels in the last few months, reaching 3.3pc in September for existing mortgages and just 3.08 per cent for new mortgages.
The growing interest in property has been fuelled by government schemes such as Help to Buy. Other factors have also affected the housing industry, such as a greater level of competition between lenders searching for new business in a growing and increasingly healthy market.
Because of the massive losses many lenders incurred during the financial crisis, a growing number have taken more cautious approaches to lending. Customers face new barriers from far pickier lenders, and small mistakes in the past are now more than enough to have significant consequences for individuals.
Financial experts recommend that would-be borrowers try to establish a record of timely repayments before taking out any loans using several tactics. These include building an address history – a long period of residence at one address, which can suggest career and personal stability.
Increasing your access to credit is also a good strategy. Without a strong history of responsible borrowing, lenders have little to assess your suitability as an applicant for a mortgage. Experts recommend having some access to credit, even if you only use it for occasional purchases.
Staying within established credit limits – whether it’s an overdraft or credit card – is also sensible. Exceeding an overdraft is seen as a warning that you lack any financial stability – a warning that lenders take very seriously. Keep your accounts open and avoid nearing your credit limit on a frequent basis.
Finally, try to keep your existing credit cards open as long as possible. Interestingly, it’s better to save several credit cards that are rarely used – or even unused – than it is to have none at all. Lending experts recommend that borrowers “mature” their accounts by keeping them open without necessarily using them for borrowing.