A petition with over 100,000 signatures proposing that lenders consider rental payments as proof of mortgage repayment ability has been formally rejected by the Government.
The petition’s creator Jamie Jack Pogson, says that he wants, ‘paying rent on time to be recognised as evidence that mortgage re-payments can be met.’
‘Since living on my own I have paid £70,000+ in rent on time yet still struggle to get a mortgage. Unless you’re getting handouts, wealthy or in receipt of inheritance it’s almost impossible,’ he added.
Despite the petition, the parliamentary debate concluded that lenders, ‘must consider a range of factors when assessing a mortgage application,’ and that meeting rental payments is, ‘not sufficient in itself’ to demonstrate complete affordability.
The Government argues that this is due to the affordability assessment being subject to a wider range of factors. These include:
- Borrower’s income
- Household expenditure
- Able to hit payments if interest rates rise
Responding, the Government said: ‘It is important to be aware that home ownership brings a number of additional expenses that may not be incurred when renting, including maintenance costs and buildings insurance. Before extending a loan, lenders must satisfy themselves that a borrower will be able to meet these additional on-going costs when considering a mortgage application.’
The response also said: ‘Many lenders also use information from Credit Reference Agencies when considering mortgage applications. This is because previous customer behaviour, in terms of paying back debts, tends to be a relatively good predictor of future behaviour. Therefore if prospective borrowers have a history of good financial management it can improve their chances of obtaining credit.’
‘Beyond the FCA’s requirements, decisions around the availability of individual mortgage loans remain commercial decisions for lenders, and the government does not seek to intervene in these. Whilst one lender may be unable to offer a mortgage, being denied a mortgage from one provider does not preclude a customer from being offered credit elsewhere. There are a wide variety of mortgage products available in the UK and prospective borrowers may benefit from shopping around.’