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First-time buyers need a boost to keep the home dream alive – Fearon

by: Richard Fearon, chief executive at Leeds Building Society.
  • 24/05/2023
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First-time buyers need a boost to keep the home dream alive – Fearon
With the Bank of England increasing interest rates for the 12th successive month in May, prospective borrowers have not had it as bad as this for nearly 150 years.

House prices are now at their most unaffordable level relative to incomes since 1875, our founding year.  

That’s why I’m so proud that at Leeds Building Society we have become the UK’s first mortgage provider to partner with the credit referencing agency Experian to connect to its free Experian Boost service and give first-time buyers extra support in getting onto the housing ladder. 

The concept behind Experian Boost is simple. The service allows the last 12 months of regular debit payments, such as council tax or even subscriptions to digital entertainment services like Netflix or Spotify, to contribute to your credit score and be factored into mortgage applications to Leeds.  

  

Reinforcing a borrower’s credit score 

We all have a credit score and it’s our individual borrowing record that is the key part in determining how good, or bad, it is.   

Banks and building societies use credit scores to help decide whether they can responsibly lend someone money or open accounts giving access to debit or credit cards. The better the credit score, the more chance a person has of accessing financial products.  

The Boost service uses open banking to link an applicant’s current account payments to their credit score, which is then connected to the mutual’s lending systems. Currently, credit referencing agencies do not include these types of regular outgoings in their calculations. 

According to research from Experian, more than five million people in the UK are currently ‘invisible’ to financial companies because there is simply insufficient information about their finances. This means that they might not be able to access credit – including mortgages.   

During testing, we found that 7.5 per cent of our mortgage applicants would have gained an improvement in their credit score by using Experian Boost, and it will never cause a score to go down.  

It’s worth mentioning that there are other factors that are considered by lenders when assessing an individual’s mortgage application, such as their income and employment status. However, what Experian Boost does is provide an additional layer of information to consider, potentially tipping the scales in favour of someone who might have otherwise been rejected due to a less-than-perfect credit score. 

 

Bringing in the underserved  

This will particularly help younger borrowers, first-time buyers and anyone on lower incomes who face the toughest challenge to prove their ability to repay. Indeed, most existing Boost users are renters. Often through no fault of their own, these groups can struggle to build a good credit score because they need to spend most of their earnings on rent and other regular payments – something which does not seem fair to us. 

The difficulties facing would-be homeowners are a sad indictment of decades of inertia over the UK’s housing crisis. But we will continue to find ways we can help and put homeownership within reach of more people, just as we have for almost 150 years.   

It is no coincidence that a building society is the first to offer this service – our founders from the Victorian factories in Leeds were among the original homeownership pioneers and I’m delighted that we’re maintaining that tradition. 

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