Mortgage lenders need to move with the times to help more people access the finance they need to buy a home.
Analysis of the mortgage market by specialist lender Together suggests more than half of applicants are rejected by lenders because of their lifestyle choices. Those lifestyle choices include self-employment or buying a more unorthodox type of property.
‘Non-standard reasons' for rejection
Together commissioned a YouGov survey that quizzed around 2,000 people about their experience of applying for a mortgage to discover the reasons potential borrowers were turned down for mortgage finance.
An astounding 54 percent were given a flat no for "non-standard" reasons, such as how they are employed - the self-employed, contract workers or those who take a dividend in lieu of salary were all turned down for a mortgage.
The type of property being considered by borrowers also affected how lenders considered their application. For example, buying a conversion or a high-rise flat was enough to induce a negative reaction from lenders.
Rigid borrowing criteria is outdated
According to Together, mainstream lenders have failed to keep pace with a changing world that means their rigid borrowing criteria is outdated. More of us are involved in flexible employment, while the range of homes on the market has also changed.
Its research revealed that 12 percent of those quizzed were denied a mortgage because of their type of employment - according to Together, self-employed people are being "locked out" of the mortgage market by some lenders, despite the numbers of those who work for themselves rising to record levels in the last decade. Even where those borrowers were earning enough to repay a mortgage, their application was rejected.
Locked out of lending
One in 10 potential borrowers (10 percent) lost out because the lender considered the property they intended to buy as "non-standard". Those properties ranged from converted barns to high-rise apartments in city centres.
Two-thirds (66 percent) of millennials, those aged from 18 to 34, quizzed by YouGov said they had failed to secure a mortgage because of how they live and work, the effects of which locked them out of mainstream lending criteria.
But it's not only the young and mobile workers who are struggling to convince lenders to give them a mortgage. According to Together, almost half (46 percent) of the over 55s have been turned down for a home loan, deemed too close to retirement.
New normal now applies
Pete Ball, CEO of Together personal finance, said: "The world has changed. People's pay, working patterns and pensions have altered beyond all recognition from 30 or 40 years ago.
"Even where they live, who they chose to live with or the type of property they want to buy is vastly different from a generation earlier.
"What was previously thought to be 'normal' simply doesn't exist anymore."