According to research from Together, which surveyed around 7,000 adults, the reasons behind this were varied, from adverse credit to being rejected from government schemes.
Around 26 per cent said they had planned to use government schemes like Help to Buy or shared ownership but had their application rejected.
Nearly a third said they had a County Court Judgement (CCJ) as a key reason for being turned down for a mortgage.
Almost a fifth of all UK adults are categorised as having adverse credit. This is regardless of whether they have had a mortgage approved, rejected or have not applied for one.
Bad debt incoming
Adverse credit covers those who have missed payments on a loan or credit card, which was pegged at seven per cent, missed payments on unsecured loans and entering into debt management plans which both came to six per cent respectively.
Nearly four per cent apiece said they had been issued with a CCJ or defaulted on their mortgage or loan.
Together said that the cost of living crisis would impact people’s day-to-day finances and ability to keep up with mortgage repayments and increased likelihood of applicants’ credit scored being impacted.
The lender said that the research highlighted the need for specialist support for lenders to account for reasons a borrower may have adverse credit.
Rejection also takes an emotional toll, with 32 per cent saying it left them feeling worried about the future, 26 per cent saying it made them depressed and 23 per cent saying it made them feel like a failure.
Pete Ball, personal finance CEO at Together said: “It is imperative that the mortgage market works towards becoming more inclusive, especially as today’s the cost of living crisis will likely have a long-term impact on our financial wellbeing.
“As the cost of living crisis shows no signs of letting up, we anticipate the proportion of those with adverse credit is set to rise in the immediate-term. We will see more potential borrowers being overlooked by some mainstream lenders because of factors such as missing a bill payment on a credit card or another type of unsecured loan.”
He continued: “These credit blips may date back years – or be something the applicant is completely unaware exists – but can have repercussions on their ability to successfully apply for a mortgage.
“Our research into the mortgage market highlights the growing need for specialist lenders to help remedy the issues faced by borrowers who are categorised as ‘non-standard’ or with adverse credit. However, a longer-term plan must be put forward and supported by the Government to address the issues facing potential borrowers today.”
