23 January 2024 , 21:07
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Martin Lewis has urged first-time buyers to do a simple online check before applying for a mortgage.
The MoneySavingExpert.com founder used his ITV Martin Lewis Money Show broadcast this evening to discuss all things mortgages and housing. For those wanting to buy a property, he urged them to check their credit file on all three credit referencing agencies - Equifax, Experian and TransUnion - before applying for a mortgage.
Your credit file shows your history of repaying debt, as well as if you have any outstanding debts or missed payments. It is different to your credit score, which is simply used to illustrate what kind of borrower you are.
Speaking this evening, Martin explained it is important to check your credit file for any errors - as even simple mistakes could see your mortgage application rejected. He said: “Before you apply [for a mortgage] please check all three credit reference agency files - this is not your credit score, that’s a semi-meaningless indication - this is the report which has the details on. Equifax, Experian and TransUnion.
“They are all available for free online if you know what you’re doing. You need to check line by line for errors. I know people who have not got a mortgage because an old mobile phone is linked to the wrong address and it triggered the fraud scoring, so they got turned down for a mortgage. All they needed to do was update the old mobile phone address.”
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On top of this, Martin recommended minimising other credit applications and not missing any bill payments if you're due to start a mortgage application. He also explained how first-time buyers should be "frugal" with their spending in the run-up to applications, as lenders will use a "stress test" to see if they can afford their new property at a higher rate.
Stress testing allows the lender to see if a borrower would still be able to afford their home even if their mortgage interest rate was to rise in the future. Martin explained: "New lenders must be affordability stress tests. So what they’re doing is, they’re not saying ‘Can you afford your mortgage you’re getting?’
"They’re adding a rate on top to see if you can afford a more expensive mortgage when you do so. For that, they’ll want evidence of your income, bills, and spending, so be frugal leading up to an application."