Misconceptions about mortgage eligibility could be causing prospective first-time buyers to rule themselves out of the market before exploring their options, new research suggests.
A Lloyds survey of more than 1,000 prospective first-time buyers found 58% incorrectly believed having existing debt would automatically prevent someone from securing a mortgage.
More than a third (37%) thought a 20% deposit was essential, while 40% believed using an overdraft would prevent approval and 38% thought receiving benefits would rule an applicant out.
Other perceived barriers included recently changing jobs, cited by 31%, not having a perfect credit score by 30% and being self-employed by 24%.
Lloyds highlighted that none of the factors identified would automatically prevent most lenders from offering a mortgage, although applications remain subject to individual circumstances and affordability and eligibility assessments.
The findings indicate misconceptions may be creating an additional barrier for a first-time buyer market already facing affordability pressures.
More than a third (37%) of those surveyed were concerned about having a mortgage application rejected.
Ian Harris, President of NAEA Propertymark (National Association of Estate Agents), commented: “The reality is that buying a first home is already challenging, with affordability, deposits and access to suitable housing all significant barriers.
“The last thing prospective buyers need is to rule themselves out because they believe having existing debt, being self-employed, using an overdraft, or not having a perfect credit score automatically means they cannot secure a mortgage.”
Harris added: “For first-time buyers, the research reinforces the value of seeking professional advice early from a regulated property agent and qualified mortgage adviser. Working with trusted professionals can help prospective buyers understand their individual circumstances, navigate the process with confidence and make informed decisions about the options available to them, rather than being deterred by common misconceptions.
“However, we must also recognise the wider affordability challenge. Helping buyers understand their options is important, but it cannot on its own resolve the fundamental pressures facing first-time buyers, including house prices, deposit requirements and the cost of living.”
James Nightingall of HomeFinder AI commented: “Affordability is the main concern for first-time buyers but it goes far beyond mortgage availability. Many delay their search amid wider political and economic uncertainty including interest rates and tax regulations.
“It’s no longer about just having a deposit to get on the ladder quickly; it’s about long-term plans and being prepared and able to accommodate future rate rises or other growing expenses including the cost of living.”
