If your mortgage application has been declined, it’s important not to panic—rejections are relatively common. What matters most are the steps you take next to address the issue and improve your chances of approval.
Common reasons mortgages are declined
Mortgage applications can be declined for a variety of reasons, many of which are specific to individual circumstances. Here are some of the most common reasons:
Affordability Issues
Lenders may determine that you cannot comfortably afford the repayments based on: Insufficient income. High outgoings or a poor debt-to-income ratio. Failing stress tests designed to assess your ability to cope with future interest rate increases.
Credit Problems
Adverse credit history, such as: Late payments, County Court Judgements (CCJs), or defaults. A low credit score or a history of multiple recent borrowing applications. Some lenders specialise in offering mortgages to applicants with complex or poor credit profiles.
Existing Debt
A high level of debt can lead to rejection, especially if: Your debt-to-income ratio is too high. Bank statements show erratic spending habits or regular gambling transactions.
Employment History
Lenders often prefer stable employment and consistent income. Issues include: Being self-employed or freelance without sufficient proof of income. Inconsistent earnings, such as reliance on commission, overtime, or bonuses that some lenders do not consider.
Deposit Source
While meeting minimum deposit requirements is standard, a lender may decline your application if: The deposit comes from an unusual or unverified source, such as cryptocurrency profits. They are uncomfortable with gifted deposits or funds from a personal loan.
Property Concerns
Issues revealed during the property valuation survey may include: A down valuation, where the lender’s valuation is lower than your offer price. Structural or non-standard construction issues that increase perceived risk.
Miscellaneous Reasons
Not being registered on the electoral roll. Administrative errors or lack of transparency in your application. In rare cases, rejection without an explanation.
Next Steps
Consulting an independent broker is essential if your mortgage has been declined. A broker can: Investigate the exact reason for the rejection. Match you with lenders who specialise in circumstances similar to yours. Help refine your application to improve its chances of success. Seeking tailored advice can often turn a rejection into an approval with the right approach.
What to do if you’ve been rejected for a mortgage
If your mortgage application has been declined, follow these straightforward steps to address the issue and improve your chances of approval:
If your lender hasn’t provided a clear reason for the rejection, consult an experienced mortgage advisor. They can review your financial details and application to pinpoint any issues, investigate potential problems, such as errors in your credit file or inaccuracies in your documentation, and identify whether the rejection was due to human error or specific lender criteria. A skilled advisor can help clarify the situation and guide you toward addressing the obstacles to approval.
Fix the Issues: Once the cause of your mortgage rejection has been identified, take steps to resolve the problem: Follow Your Broker’s Advice: Improve Your Credit Profile: Pay off outstanding debts or reduce your credit utilisation. Ensure all bills are paid on time to build a positive credit history.Dispute any inaccuracies on your credit report with the relevant credit agency. Fixing the issues proactively can strengthen your next application and improve the likelihood of approval.
Speak with the Right Lender: Approaching the right lender increases the likelihood of approval and ensures your application is aligned with their requirements.
How soon can you re-apply?
While you can reapply for a mortgage immediately after being declined, it’s often better to wait and take steps to strengthen your application. Waiting around three months can give you time to address credit issues and allow partial improvements to show on your credit file. Rushing into a new application without resolving the underlying issues may lead to another rejection, compounding the problem. Each declined application leaves a hard search on your credit report, which can lower your credit score and make future borrowing more difficult.
Taking the time to properly prepare before reapplying can significantly improve your chances of securing a mortgage.
Stages when a mortgage can be declined
After an offer has been accepted - It’s common for buyers to make an offer on a house without first securing an Agreement in Principle (AIP). However, this can increase the likelihood of a mortgage application being declined after the offer is accepted.
Declined after agreement in principle (AIP) - Being declined for a mortgage after securing an Agreement in Principle (AIP) can happen if new information comes to light or if the lender identifies issues during the full application process.
Mortgage declined by an underwriter - A mortgage rejection during underwriting can be particularly frustrating, as it occurs after much of the process is complete. Typically, the issue relates to either the property or your financial profile.
After the lender’s valuation - A mortgage rejection following a valuation often stems from concerns about the property or its assessed value relative to your offer. This is commonly referred to as a down valuation.
Before completion - Being declined at the final stages of the mortgage process is less common but can occur, typically due to changes in your financial circumstances.
Can a mortgage offer be withdrawn?
Yes, a mortgage offer can be withdrawn at various stages of the home-buying process. The most common reasons include:
- Property Issues Survey or Valuation Concerns: If a lender identifies problems during the survey or valuation.
- Changes to Your Financial Circumstances: Losing your job, being made redundant, or experiencing a significant drop in income. Taking on additional debt or credit obligations, such as new loans or credit cards, which affect your affordability.
- Inaccurate or Misleading Information: Providing incorrect or incomplete details about your financial situation, such as overstating your income or failing to disclose existing debts.
Reasons specific lenders decline mortgages
Mortgage declines can occur for a variety of reasons, often tied to the specific criteria of high street lenders. Below are some examples of why major lenders may reject applications:
- Nationwide - Bad credit history or self-employment with less than two years of accounts. Requires at least 36 months of consistent address history. Generally excludes income from commission or bonuses.
- Halifax - Rigid standards for adverse credit, including defaults or CCJs. May issue an Agreement in Principle (AIP) but decline at the full application stage after a hard credit check during underwriting.
- NatWest - Severe Credit Issues: Likely to reject applications with recent CCJs (within 2 years), Debt Management Plans (DMPs), or defaults. May decline a mortgage after a valuation if problems arise with the property’s construction or price.
Other Popular Lenders like Aldermore, Yorkshire Building Society are known for being slightly more flexible with credit issues but may still reject applications based on affordability or property-specific issues. HSBC typically requires strong credit history and stable employment, with stricter LTV limits for non-standard construction properties.
Frequently Asked Questions
Not directly. Here’s how mortgage applications interact with your credit report: When you first apply for a mortgage, the lender usually performs a soft credit check to assess your eligibility. This won’t impact your credit score and isn’t visible to other lenders. Hard Search: If you proceed to a full application, a hard search is recorded on your credit file. This is visible to other lenders and may slightly lower your credit score. A rejection itself does not appear on your credit report.