House prices continue to rise and the cost of living has started to soar, leaving many feeling the first rung of the property ladder may be slipping ever further out of reach. However, with the re-emergence of 90% and 95% LTV mortgages for first-time buyers this year, the route to home-ownership is already easier than 2021.

The outbreak of Covid-19 in 2020 saw around ninety per cent of all 90% and 95% mortgages withdrawn from the market as lenders feared a recession, but thanks to the government’s 95% mortgage guarantee scheme and the global economy reopening the situation in 2022 appears to have improved.

Since the start of the year, the Bank of England’s base rate has increased from 0.1% to 0.75%, but according to Which? this change has so far had little impact on low deposit mortgages, and the increased competition for young buyers has even resulted in lower rates at some lenders.

Whilst the situation is improving for first time lenders with small deposits, it remains difficult for those with a bad credit history to obtain a mortgage. When applying for a mortgage, a person’s credit score is one of the many factors that lenders take into account, and unless they have a larger deposit to offset some of the risk, many lenders may consider a person with a bad credit rating as too much of a risk.

Nonetheless, every bank, building society, and lender has different criteria and tests for their mortgages, and each case is considered on its own merits. So even with CCJs on a person’s record or a missed credit card payment within the last six years a specialised mortgage advisor may still be able to help a buyer secure bad credit mortgages if the infractions were relatively minor.

Whether you are looking to buy a house this year or it is something you are planning on in the future, it can be a useful exercise to start to budget and work on improving your credit score today. In the UK there are three major credit reference agencies, TransUnion, Equifax and Experian, which work with financial institutions, mobile phone companies, and other retailers to help determine the risk of lending to a person applying for credit. And it is possible to check your rating with each agency for free via CreditKarma (TransUnion), ClearScore (Equifax), and the Money Saving Expert Credit Club (Experian), so you can see exactly what details these firms look at and where you can improve.

Mortgage advisors should help you complete a budget planning exercise before helping you secure a mortgage, but if you can already be on top of your finances when you start to look for a mortgage then you will find it a simpler and less stressful process.

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