A petition that received over 100,000 signatures urging lenders to consider rental payments as proof of ability to meet mortgage has been formally rejected by the government.
The creator of the petition, Jamie Jack Pogson, says he wants “paying rent on time to be recognized as evidence that mortgage re-payments can be met”.
He states: “Since living on my own I have paid £70,000+ in rent on time yet still struggle to get a mortgage. Unless you’re getting handouts, wealthy or in receipt of inheritance it’s almost impossible.”
However the parliamentary debate concluded that lenders “must consider a range of factors when assessing a mortgage application”, adding that meeting rental payments is “not sufficient in itself” to demonstrate affordability over the lifetime of the loan.
The government said this is because the affordability assessment must take account of a much wider range of factors, including a borrower’s income, committed and household expenditure, and the ability of the borrower to meet payments in the event interest rates were to rise.
In its response, the government said: “It is important to be aware that home ownership brings a number of additional expenses that may not be incurred when renting, including maintenance costs and buildings insurance. Before extending a loan, lenders must satisfy themselves that a borrower will be able to meet these additional on-going costs when considering a mortgage application.
“Many lenders also use information from Credit Reference Agencies when considering mortgage applications. This is because previous customer behaviour, in terms of paying back debts, tends to be a relatively good predictor of future behaviour. Therefore if prospective borrowers have a history of good financial management it can improve their chances of obtaining credit.
“Beyond the FCA’s requirements, decisions around the availability of individual mortgage loans remain commercial decisions for lenders, and the government does not seek to intervene in these.
“Whilst one lender may be unable to offer a mortgage, being denied a mortgage from one provider does not preclude a customer from being offered credit elsewhere. There are a wide variety of mortgage products available in the UK and prospective borrowers may benefit from shopping around.”