Thousands of UK mortgage applicants are facing the mental and emotional toll of being locked out of the “broken” mainstream market, suggests new research from specialist lender Together.

Back in 2022, in the aftermath of the Covid crisis, 19% of non-standard mortgage applicants – those that don’t neatly fit the automated criteria of mainstream banks and building societies – had been rejected in the past one to five years. 

Two years on, Together’s new research reveals mortgage acceptance rates are still low for these applicants with ‘non-standard’ needs, with 7% still struggling to secure a mortgage, according to new research published in Together’s Residential Property Market Report.

This could be for those wishing to buy a property under the government-backed Shared Ownership scheme, or who may be denied access to finance because of their age, employment situation, impaired credit history or a combination of these factors.

For example, two in five (39%) of potential borrowers attempting to get on the housing ladder said their mortgage application had been rejected because they were buying through Shared Ownership.

Nearly a third (29%) were denied due to having a thin or impaired credit history and 27% said this was due to them being over 55 or divorced, while 22% said this was due to being self-employed. 

This comes as a significant proportion of borrowers continue to fall foul of the rigid lending criteria set by most mainstream banks and building societies. Together’s research shows a marked need to support such underserved borrowers, with the specialist lending market forecast to swell from £32 billion to £54 billion over 2023-29 – a significant 70% increase.

And the stress of rejection because of these factors is impacting on applicants’ emotional health. 

For example, a quarter of ‘non-standard’ applicants who have tried to get a mortgage have felt stressed or upset at times during the process – including those who are self-employed, older or divorced. 14% of this group have also felt judged when trying to get a mortgage – rising to almost a quarter (24%) of those with thin or impaired credit. 

More than one in ten (12%) of ‘non-standard’ applicants who have tried to get a mortgage have had sleepless nights trying to get on the ladder, and this rises to 19% among those using schemes like Shared Ownership to buy their home. Some have even given up on their housing ambitions altogether, with 5% of applicants wanting to buy a ‘non-standard’ property (including a holiday home, park home, thatched cottage or property made from wood, concrete or steel) going back to renting. 

When asked what they found challenging when applying for a mortgage – 32% said it was the time spent gathering information for the application and 17% said it was too difficult or time consuming to meet all the requirements for a successful application. 

Specialist support where people’s finances are treated on a case-by-case basis offers a viable solution to helping more people pursue their property plans regardless of whether they’re self-employed, are buying an atypical property or even have a missed bill or loan payment on their record, likely due to the cost of living.

Ryan Etchells, chief commercial officer at Together, comments:“Life and work as we’ve known it is evolving and there are now more of us who don’t comply with the ‘one size fits all’ lending methods of what worked for previous generations. And, while it’s positive that the proportion of those rejected for a mortgage has fallen over the last five years, challenges remain, and the emotional toll is still of great concern.

“In order to support more people with their property ambitions, we need to work in step with the wider industry to make the application process as seamless as possible, and continue to challenge the outdated systems, processes and stereotypes which are responsible for many of the access barriers that exist.

“Chancellor Rachel Reeves’ Budget in October saw the important task of cementing plans for the Affordable Homes Schemes and house-building efforts from next year. But what’s missing is Government intervention at industry level to reassess exactly how to bridge the issue of affordability and home ownership in the UK whilst specialist lenders look to continue to support those that are locked out of home ownership by a broken mainstream mortgage market.”