Does this sound reasonable?

Lunko

Hi everyone,

My partner and I recently put down a reservation fee on a new-build flat. We had already obtained advice and an illustration from our broker for a mortgage with Nationwide at a fixed rate of 4.98 for 2 years, followed by a variable rate. The value of the property is £139,950, and we have a deposit of £20,000. We sent off our application at the beginning of January. 1 week later, we asked our broker to chase Nationwide and they requested that we send 6 months worth of bank statements.

My partner and I have a less-than-brilliant credit score, with a few missed payments for credit/store cards, periods of being over-limit on credit cards and living in our overdrafts for times. We have seperate current accounts, and my partner has another account which we both pay into each week/month, to cover rent and bill payments. This account is always in credit. We sent off 6 months worth of bank statements for our current accounts and also for our rent account, which at the time was approx. £750 in credit. Our combined salaries and overtime payments are approx. £45,000.00.

A week later we still had not heard anything and so asked our broker to chase Nationwide again. Firstly, they asked him where our deposit was coming from, and he advised that £14,000 is from a bond - the funds for which were left to my partner by her father in his will - and the other £6,000 from my partner's mother as an early inheritance. A few hours later they came back to our broker and advised that our application had been declined for 2 two reasons:

1. The amount we currently pay in rent is less than the amount we would be paying for the mortgage. (Not true in the first instance - we currently pay £575 per month; on the mortgage we would have been paying £499.86 per month for two years, although it would then increase to approx. £651.43 per month after that).

2. We didn't appear to have any savings (So what was the £14,000 from my partner's bond?!).

Basically, Nationwide have had our application for a month now and have declined for those reasons. The deadline for exchanging contracts on our flat is now just over 2 and a half weeks away, and we are both extremely disappointed and panicking to say the least! Does anyone think this has anything to do with the recent interest rate rise and Nationwide putting a stop to their sub-5% mortgage deals?

Any advice would be most appreciated!

Rick62

I think it must be because your credit score was marginal and then the two reason that they gave. That you were not saving money with your current outgoings (the bond was an inheritance, not savings) and the mortgage, at the SVR, would be greater than your curent rent.

Lenders are now, prompted by the FSA, very keen on 'affordability' ie taking everything into account can you afford the monthly payments, including at the SVR and if they increase by say 1%.

Lunko

Thank you for that.

From the info I've given above, do you think it would be worth asking our broker to look at adverse credit mortgages?

Rick62

You mightbe able to get something like a light adverse at not too high a rate. Yes, talk to your broker see what he suggests.