Consumers ready to stretch themselves to secure dream home

New research from Experian found that nearly two fifths (38%) of consumers said they were considering buying a new home within the next five years, rising to 66% of people in their 30s and 67% of those in their 20s.

People also suggested they are prepared to stretch themselves to secure their dream home, with nearly one third (31%) saying they would buy a property even though it could mean a very small amount of disposable income left each month. Yet, even though they want to own a home, 49% of people in their 30s and 42% in their 20s were worried that they’d never appear ‘mortgage-ready’ to providers.

Further, nearly one-third of consumers (27%) said they were unsure of how to prepare to get a mortgage. Experian has found common misunderstandings in the mortgage application process and is clearing up assumptions to help people secure their dream properties.

James Jones, Head of Consumer Affairs at Experian, said “It’s important to understand what properties are in your price range and the types of mortgages available to you.”

“With our research suggesting that many are prepared to stretch their budget and purchase a property at the top of their price range, it goes to show how much home ownership is a source of pride and joy for people in the UK. Taking the time to improve your credit score when searching for your perfect home will help you access the best mortgage rates and, as a result, have more disposable income every month to spend on other things.”

“It’s positive to see that the majority of potential buyers understand the importance of their credit history, as unpaid bills and other red flags on credit reports can scupper people’s chances of securing a good mortgage deal. Making yourself as attractive as possible to a mortgage lender starts with knowing your credit score.”

To help improve people’s understanding of the mortgage process, many consumers wanted greater personal finance education in schools with over two thirds of consumers (67%) said no one had taught them about mortgages

The majority of consumers think it’s a good idea for schools to start teaching them about the mortgage market and the importance of paying bills (75%)

Jones continued “Today’s research demonstrates some misunderstandings among consumers when it comes to how they should be preparing for a mortgage. For example, missed credit card payments can impact their mortgage options, and simply comparing deals online won’t affect their credit score.

“It’s perhaps for this reason people believe that they should be given introductions to the world of personal finance at a younger age.”

Mortgage Assumptions  survey:

Perception	Fact or fiction	Experian says
You can’t get a mortgage if you’re in debt	Fiction	Over three fifths (62%) said it was either not possible to secure a mortgage when in debt, or were unsure whether they could do so.   Remember, you should only get a mortgage if you can afford the monthly repayments. Any existing debt you have will be factored into a mortgage lender’s assessment of your ‘affordability’.   There are many reasons people can go into debt, from taking a loan out to pay for a car, or even paying for a course upfront to further their careers. Making regular, on time payments to reduce any existing debt can increase your credit score and help you appear more attractive and mortgage-ready to lenders.
Comparing mortgages online can impact your credit score	Fiction	58% of consumers either thought comparing mortgages online would affect their credit score, or they were unsure if it would.   Searching for mortgages before you apply has no impact on our credit score. Free mortgage eligibility checkers, like the one Experian offers, allow first-time buyers and those wanting to move home to see how much they can borrow, as well as the different mortgage options and interest rates on offer.
You should only apply for a mortgage once you’ve found the property you want	Fiction	54% of people surveyed thought that this was true, or were unsure about this.   In fact, people should start the mortgage process earlier, and before finding the home they want to buy. You can secure a decision in principle with a lender before formally attempting to secure the mortgage loan, which will give you an accurate idea of what you can borrow.   This will help guide your property search as it gives you an idea of budget, and some estate agents could expect people to have a principle offer in place before a property is bid on, or even viewed.
Missed credit card payments can impact mortgage options	Fact	Over a quarter (26%) thought this was false or were unsure of the answer.   A single recent late payment can wipe around 130 points of your Experian Credit Score. Understanding your credit score and how it could be improved is the first step to ensuring you are in the best possible position to apply for a mortgage. The higher your credit score, the better your chances of being accepted for a mortgage, and at the best rates.
You can only get a mortgage with the company you bank with	Fiction	Almost a quarter (24%) of Brits are either mistaken or unsure about this.   You can look for a mortgage with lots of different providers – and the most important thing is to find the one that’s right for you. In checking which mortgages you are eligible for online and for free, you’ll find out what the best rates are.
Credit history is important to getting a mortgage	Fact	One fifth (19%) of Brits thought credit history wasn’t important or didn’t know that credit history was important in the mortgage application process.   Looking at your credit report will help you to see what is impacting your credit score. Reports generally cover your financial track record over the past six years. The sooner you understand what your credit score is and take steps, if necessary, to improve it (for example, by addressing previous debt problems), the better.