Six out of ten mortgage applications rejected in the last five years were from first-time buyers.
Altogether, a total of 1.57m mortgage applications – worth an average of £144,600 each or collectively £227bn – have been turned down.
This was despite the average deposit being around 20%, while 794,000 of those turned down had deposits or equity of more than 20%.
Research by Castle Trust among applicants found that 60% of people rejected for a mortgage were – or would have been – first-time buyers; a further 22% were home movers and 11% were remortgagers.
Of the remainder, 3% wanted to increase their mortgage and 4% wanted a mortgage for other reasons.
Castle Trust warned that it could become harder to secure a mortgage in future because banks will have to hold more in capital reserves.
Separate research showed that 71% of advisers believe the amount banks will be willing to lend will be lower than historic levels. Furthermore, 72% anticipate that mortgage rates will increase over the next five years.
Castle Trust last month launched a new type of mortgage called Partnership Mortgages. These are for 20% of the value of an owner-occupied home alongside a repayment mortgage of up to 60% from a traditional lender and a deposit of at least 20%.
When the borrower sells, Castle Trust takes a share in the property’s rise in value – or takes a hit on the loss.
If the property has risen in value, Castle Trust will want back its original loan plus a 40% share of the rise in value.
If the home has lost value, Castle Trust will want its original loan back minus 20% of any fall in value.
Borrowers using Castle Trust’s proposition will do better in a falling market, but clearly Castle Trust needs a rising market to succeed.
Castle Trust is financing the proposition through savers who invest in ‘HouSAs’, where house prices are linked to the Halifax House Price Index.
The company has not yet revealed how its offering is faring, although there have been rumours that first-charge lenders have so far failed to be impressed.
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