Could you need to pass an exam to get a mortgage?

Posted in 'Mortgages' by Richard Catlin

07 May 2010

If the chairman of the Consumer Credit Counselling Service (CCCS) has his way, then yes. Alarmed by the increase in requests for help with debts that it has received since the onset of the recession, the head of the charity has called for first time buyers to face more rigorous tests before being allowed to commit to purchasing.

The CCCS has said that it received 93,000 requests for assistance via its debt helpline in the first three months of 2010 - a significant increase on the 69,000 it received in the same period last year.

CCCS chairman Malcolm Hurlston believes that mortgages should come with a health warning, and should be “sold like driving licences, after study and an exam", where first time buyers would be better educated, assessed and then issued with a certificate to say they are financially fit to buy a home.

Mr Hurlston has also called for American style pre-mortgage counselling to be offered – where free advice is available about the home buying process and debt management.

With or without mortgage exams, the recession-driven tightening-up of the home loan market means that fewer people should get into financial difficulty going forwards. ‘Responsible lending’ is currently the main influence within the lending departments of banks and building societies. For the moment at least, marketing-led ‘lend to anyone’ criteria, that historically has allowed some to borrow more than they can afford, are well buried.

Using your credit history to determine whether you qualify for a mortgage or other personal finance has been proven time and time again to be the most accurate way to find a willing lender. Your credit rating will also determine the rate you’re asked to pay – potentially making a significant difference to your repayments.

You can check your credit report online based on all three UK credit reference agencies together and see how you rate here. Any slight mistake on your credit file could mean you end up paying more than you should when you do get a mortgage.

Remember that you can get free, impartial advice on dealing with debts, whether big or small, through the Debt Advice Centre on checkmyfile, and if you are having trouble getting a mortgage in the current tight market, try this specialist broker.