Admin, Author at First Select Mortgage Brokers

Budgeting Credit Score

Navigating the UK Mortgage Landscape with a Low Credit Score

Securing a mortgage in the UK can be a daunting task, especially for those with a low credit score. However, understanding the intricacies of credit scoring and taking proactive steps can significantly enhance your chances of approval. This guide delves into the challenges faced by individuals with low credit scores, offers insights into how credit scoring works, and provides actionable recommendations to improve your creditworthiness.

The Impact of a Low Credit Score on Mortgage Applications

A credit score is a numerical representation of your creditworthiness, influencing lenders’ decisions on whether to offer you credit and at what terms. In the UK, credit scores are assessed by agencies like Experian, Equifax, and TransUnion. A lower score can pose challenges when applying for a mortgage:

Higher Interest Rates: Individuals with lower credit scores may be offered mortgages with interest rates 1% to 2% higher than average. Essential Mortgages
Stricter Lending Criteria: Lenders may impose more stringent conditions, such as requiring a larger deposit or offering a reduced loan amount.
Limited Lender Options: Some mainstream lenders might decline applications from those with poor credit histories, necessitating a search for specialized lenders.moneysupermarket.com

Understanding Credit Scoring

Credit scoring involves evaluating your financial history to predict your future credit behavior. Key components considered include:

Payment History: Timeliness of past debt repayments.The Guardian
Credit Utilization: The proportion of available credit you’re using.Experian
Length of Credit History: Duration of your credit accounts.The Guardian
Types of Credit: Variety of credit accounts, such as credit cards, loans, and mortgages.
Recent Credit Inquiries: Number of recent applications for new credit.

Each credit reference agency has its own method of calculating a credit score, and some lenders use proprietary algorithms. Lenders assess these scores to determine the risk of lending to you. Citizens Advice

Recommendations to Improve Your Credit Score

Enhancing your credit score is a strategic process that requires consistent effort. Here are five actionable steps:

Register on the Electoral Roll: Being listed on the electoral register helps lenders verify your identity and address, boosting your credit score. Experian
Maintain Timely Payments: Consistently paying bills and credit commitments on time demonstrates financial reliability. Setting up direct debits can ensure punctuality. MaPS
Manage Credit Utilization: Aim to use less than 30% of your available credit limit. For instance, if your limit is £1,000, try to keep your balance below £300. Experian
Limit New Credit Applications: Frequent applications for new credit can signal financial distress. Space out credit applications and apply only when necessary.
Review Your Credit Report Regularly: Obtain your credit report from agencies like Experian or Equifax to identify and rectify any inaccuracies.

Positive Developments in the Mortgage Market

Recent changes in the mortgage landscape offer hope for applicants with less-than-perfect credit histories. For instance, Loughborough Building Society has revised its lending criteria to accept applications with up to 95% loan-to-value (LTV) from individuals with minor credit issues, such as unsatisfied defaults on utility bills and telecommunications. This initiative acknowledges the challenges posed by the cost-of-living crisis and aims to support first-time buyers. The Scottish Sun

Conclusion

While a low credit score can present obstacles in securing a mortgage, understanding the factors that influence your creditworthiness and taking deliberate steps to improve it can enhance your prospects. The evolving mortgage market, with lenders adopting more flexible criteria, further underscores the importance of proactive financial management. By implementing the recommendations outlined above, you can embark on a path toward improved credit health and home ownership aspirations.

Our team of experts are ready and waiting to help. Contact the team below:

Phone: 0161 393 1575 // 07780 446 937

Email: hello@firstselectfs.co.uk

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Admin

Apr, Wed, 2025

First Select Mortgage Brokers Right to Buy

Right to Buy Mortgage

Changes to Right to Buy: November 2024

The Right to Buy scheme has allowed council and housing association tenants (that qualify) the right to buy their home. The scheme was designed to turn a generation of renters into home owners, giving them some security and ownership of their property.

The scheme has been political, with Labour keen to reduce the scheme to allow more homes available for rent, with Conservatives keen for people to be able to own their own home and leave an inheritance.

When originally launched in 1980, the scheme offered a significant discount off the cost of buying your home. Different governments have come in and made changes to the scheme over the years. The biggest changes were between 2012 ~ 2014 when the discounts were increased to their current level.

Discounts since 2014:

The maximum discount on any property is capped at £96,000 across England, and £127,900 for properties in London. The amount of discount increases every year in line with the consumer price index (CPI).

HOUSES: You can get a 35% discount for tenants renting for 3 – 5 years. After 5 years, the discount increases by 1% for every additional year up to a maximum of 70% or the above mentioned discount cap.

FLATS: You get a 50% discount for tenants renting for 3 – 5 years. After 5 years, the discount increases by 2% for every additional year up to a maximum of 70% or the above mentioned discount cap.

The maximum discount from April 2024 is £136,400 in London, and £102,400 outside of London.

What is changing?

From 21st November 2024 the amount of discount you can get will reduce. You can still buy your home for a discount, but the discount is less. This means you will need a bigger mortgage and/or cash deposit to buy your home. A bigger mortgage will usually mean the monthly payments will be higher. You may also need to save for a deposit depending on the value of your home. Tenants in London where house prices are high, will almost certainly need to

Discounts from 21st November 2024:

The maximum discount you can get is the lower of:

70% of the value of the property
The maximum discount Cap for your area

Check below to see what region your home is located and the maximum discount Cap for your region. There are also some exceptions that increase or decrease the discount.

REGION	MAX. DISCOUNT	EXCEPTIONS
North East	£22,000	n/a
North West	£26,000	n/a
Yorkshire & Humber	£24,000	n/a
East Midlands	£24,000	n/a
West Midlands	£26,000	n/a
Eastern	£34,000	£16,000 in the district of Watford
South East	£38,000	£16,000 in the areas of Reading Borough and West Berkshire, Hart District, Oxford and Vale of the White Horse District, the boroughs of Tonbridge and Malling, Epsom and Ewell, and Reigate and Banstead
South West	£30,000	n/a
London	£16,000	£38,000 in the boroughs of Barking and Dagenham and Havering

Also worth noting that your discount can be reduced if your Landlord has incurred expenses in maintenance and upkeep of your property. This often impacts flats more than houses, due to communal areas, hall ways and lifts and fire systems that need to be maintained.

What do these changes mean?

In summary it will be harder to purchase your home using Right to Buy, but not impossible!

The changes will mean more people will not be able to purchase their home using the Right to Buy scheme. Because the discount is reduced, many people will need bigger mortgages, which may not be affordable. They may also need to put down a larger cash deposit to buy their home, and they may not have the savings to do so.

However, the discount is still reasonable and effectively free money off the cost of your home. The discount can be used as your deposit, so it reduces the amount you need to put in. Speak to our team of expert mortgage advisers who can advise on the best method to buy your council/housing association home.

Is my landlord the Council or Housing Association?

This can be confusing. Prior to the 1990’s almost all public sector housing was owned and managed by councils, hence the term ‘council house’. However in the 90’s and 2000’s many councils transferred the ownership of their housing stock to a dedicated business to manage all the houses, rents and be a professional landlord. If you were renting your council home before your landlord became a housing association, then your ‘Right to Buy’ will have transferred with you.

Sadly we have had clients advise us that the housing association has try dissuade and ‘put them off’ buying their home. This is not acceptable and you should raise a complaint. Housing association staff are not FCA regulated or qualified to discuss mortgage products.

Want to start the Right to Buy process?

Want to contact us about Right to Buy? Go to our dedicated page here to complete a short enquiry form.

About us

First Select Mortgage Brokers are friendly and professional mortgage brokers. We can access mortgages from the whole of the UK mortgage market, meaning we can get the best possible deal for our clients circumstances. Based in Manchester, we are a family business with decades of experience in financial services. Our goal is to be the most trusted regional mortgage advisory business in the northwest of England.