Almost three out of five first-time buyers believe that having existing debt will prevent them from obtaining a mortgage, according to new research from Lloyds.
The survey of 1,000 prospective buyers found that 58% thought any borrowing would block mortgage approval, while 37% believed a 20% deposit was essential to secure lending.
Industry pushback on findings
Lloyds suggested these misconceptions about mortgage eligibility may create unnecessary barriers, with some buyers ruling themselves out before exploring their options. However, property professionals have challenged this interpretation, arguing that affordability rather than misunderstanding represents the primary obstacle.
Ian Harris, President of NAEA Propertymark, said: “The reality is that buying a first home is already challenging, with affordability, deposits and access to suitable housing all significant barriers. Helping buyers understand their options is important, but it cannot on its own resolve the fundamental pressures facing first-time buyers, including house prices, deposit requirements and the cost of living.”
Harris added: “The message should be simple: Don’t rule yourself out before you’ve explored your options, but make sure you understand the full costs and commitments involved in becoming a homeowner.”
Additional perceived barriers
The research identified several other factors that prospective buyers incorrectly believe would disqualify them from mortgage approval. Some 40% thought having an overdraft would prevent homeownership, while 38% believed receiving benefits would be prohibitive.
Nearly a third of respondents cited recent job changes as a barrier, whilst 30% thought a perfect credit score was necessary. A quarter believed being self-employed would rule them out entirely.
These findings come as market pressures continue to affect various aspects of the property sector, with first-time buyers facing particular challenges in accessing finance.
Amanda Bryden, Head of Mortgages at Lloyds, stated: “Our research shows many aspiring first-time buyers believe they need to be debt free, have a perfect credit record or save a 20% deposit before they can even think about getting a mortgage. In reality, mortgage decisions are based on a much broader picture of your finances and circumstances.”
The findings highlight an ongoing disconnect between perceived and actual mortgage eligibility criteria, though industry professionals maintain that structural affordability issues remain the more significant challenge for prospective buyers entering the market.
