Survey reveals many Help to Buy applicants are ill prepared

Almost two fifths of 20 to 40 year olds are planning to apply to the UK government’s Help to Buy mortgage scheme in 2014, according to a new report.

However, some of these Help to Buy hopefuls could well be ill prepared, with just two fifths registered to the electoral roll at their current address, something that can be a key factor not only in passing the initial identity verification checks but also in ensuring their credit report is accurate as possible.

Furthermore, the research commissioned by Experian CreditExpert, also found that a quarter of would be Help to Buy applicants have never reviewed their own credit report and 7% have not saved for a deposit.

The report, based on interviews with more than 2,000 20 to 40 year olds, found that Help to Buy hopefuls account for seven in 10 potential mortgage applications among the under 40s and a quarter of Help to Buy Hopefuls will apply in the second half of 2014 with 7% looking to move in the next three months.

The majority of applicants are in their 20s, with 33% aged 20 to 24 years old and 31% aged 25 to 30. Their household income varies widely with 29% earning less than £20,000 a year, half earning more than £30,000 and 23% with a household income of twice the national average at £50,000 or more.

The research also found that more men than women intend to apply for Help to Buy at 43% to 34% respectively.
People in the North East are most likely to be considering Help to Buy with 50% of 20 to 40 year olds intending to do so followed by 49% in London, 46% in the West Midlands, 33% in the South East and 30% in the South West.

More urban areas account for the largest proportion of Help to Buy hopefuls, with the overcrowded hotspots of London at 17%, the South East at 12%, the West Midlands and North West both at 11%, the North East at 6% and Wales at 5%.
Some 25% of Help to Buy hopefuls have never checked their credit report to better understand how their history of managing credit could impact their application for the scheme. But 64% have checked their credit report within the last year and 31% in the last three months.

Some 14% admit they have been managing their current credit accounts poorly in recent years and a further 14% think that having a good credit history is less important for Help to Buy than for conventional mortgages when the opposite is likely to be true.

The average deposit saved by Help to Buy hopefuls is £9,590, but 7% have yet to save anything. The majority, 55%, have a deposit of less than £10,000, with 19% less than £5,000 while 30% have £10,000 to £20,000 set aside and 11% have more than £20,000.

Men are more likely to have larger deposits than women. Some 47% of men have more than £10,000 compared to 33% of women.

Londoners have the largest deposits, with 53% having £10,000 or more and 19% more than £20,000. Just 1% have no deposit, compared to 14% of those in the East Midlands and Help to Buy hopefuls currently owe an average of £4,600 in other borrowing.

‘Help to Buy has brought home ownership to within touching distance for thousands of younger buyers earlier than they may have dreamt possible. But it’s important to remember that the deposit is only part of the equation and consideration must be given to how much you can afford to borrow and crucially repay in the years to come,’ said Peter Turner, managing director of Experian Consumer Services in the UK and Ireland.

‘A larger loan means lenders taking close look at your ability to repay and a large factor in that will be based on your credit history. Anyone looking to make the most of Help to Buy would be well advised to check their credit report to better understand their credit history, and ask for help if needed to ensure your credit report paints the best possible picture before making an application,’ he explained.

‘Hopefuls should also note that in the short term, future applications for credit could be negatively impacted as lenders may want to see how well you are repaying your current credit commitments before offering you any more credit. Take this into account in your financial planning for the year ahead and, where possible, give the mortgage time to mature before making any future applications,’ he added.