Mortgage lenders saying no to people who had payday loans

Mortgage lenders saying no to people who had payday loans

People with payday loans are being routinely turned down for mortgages.

One broker said that in the last 12 months, 85% of mortgage applications it has dealt with have been turned down where applicants had payday loans on their credit history.

Of these refused applications, over half (57%) had no other issues with their credit file other than the recording of a payday loan within the previous six months.

Ascot Mortgages said most of its clients had deliberately cleared their payday loans before making the mortgage application.

However, whether paid off or not, the brokerage warned that the mere existence of a payday loan will have a very negative impact on a borrower’s suitability for a mortgage.

The firm warned that some mortgage lenders have an outright ban on payday loan customers. It said that both G E Money and Kensington Mortgages will not lend to anyone who has taken out one payday loan in the past three months, or more than one payday loan in the previous 12. Ascot Mortgages says that other lenders may follow.

The payday loan market has a current £2bn annual turnover and is used by some 1.2m people a year. Currently, some 20% of all mortgage applications are rejected.