Homeowners can't move house because they can't get a mortgage

Difficulties obtaining a mortgage mean that there is huge pent up demand from borrowers wanting to move house.

Even if your mortgage is portable and you don’t want to increase your home loan – and most will need to borrow more – many homebuyers will find they are unable to transfer their existing borrowing to a new property. 

People need to move house

This is becoming a big problem, as a significant proportion of homeowners need to move house. Research from Clydesdale & Yorkshire Banks shows that in the South East some 40% of homebuyers say they are planning to move. And for many families moving is not optional, with 14% needing to relocate and 10% expanding their family.

Much tougher lending criteria from the banks and building societies are to blame, with minimum deposits of 25% the norm along with a squeaky clean credit history.

The result is that home loans are running at less than half their average over the ten years before the credit crunch hit in 2007. Figures from the Council of Mortgage Lenders show that there were 529,300 loans advanced for house purchase in 2010 compared with an average of well over one million a year from 1997 to 2007.

Borrowers the lenders don’t like

There are a number of reasons why homeowners will have difficulty in getting a mortgage – even if they simply want to switch existing borrowing to a new property.

In most instances you will have to go through a full credit check again, as well as proof of income using much tougher affordability tests. 

If, for example, you and your partner originally raised the mortgage on joint incomes and you have since started a family and now have only one income, you may find that the lender is not prepared to even offer you the same mortgage that you have already – even if you have never been in arrears, have a perfect credit track record and are in secure employment. 

They take the view that you can no longer afford the loan now that the family income is lower and costs, as a result of having children, are higher.

David Hollingworth, of mortgage broker London & Country, said: ‘We have always said, that while lenders say loans are portable, don’t just assume that you can switch it to a new property. People are finding that they are locked into their current deal and cannot move.’

Hollingworth also cites a reduction in maximum age for older borrowers and withdrawal of interest-only loans by many lenders as reasons why lenders won’t transfer a mortgage to a new property.

There are also much tougher requirements for the self employed who must now produce two or three years audited accounts. And self-cert mortgages no longer exist.