Brokers have warned couples to be careful of who they fall in love with following the story of a pair who were refused a mortgage after one had poor credit.
The couple in question were not married and no deposit was being provided by the one with poor credit, neither were they to be named on the mortgage or deeds.
However, they did have a joint rental agreement and shared a bank account.
Although the partner with a clean credit score applied for a mortgage using their personal account, it was refused due to ‘financial association rules’.
The couple were clients of Nailsworth-based brokerage firm Hudson Rose. Managing director Graham Taylor said he thought in this case the rules were not being applied correctly.
He said: “There is a major difference between a married couple gifting a deposit between the parties and trying to circumvent adverse lending policy and a young, unmarried couple who happen to live together.
“If the risk is based on someone's ability to repay the mortgage and the loan is based on a sole income, a third party's historic credit file should not come into play.
"Surely, we live in an age now where credit scoring is advanced enough to make a decision, which perhaps was not the case a decade ago? All in all, this feels like a very outdated policy and is adding extra hurdles in an already difficult market.”
The decision was slammed by Lewis Shaw, founder of Mansfield-based broker, Shaw Financial Services, who called the “archaic” rules “ludicrous”.
He said: “It smacks of discrimination and shows that some lenders have a long way to go. How can a lender decline an application for someone just because they're in a relationship with someone without perfect credit?”
“How does lending policy such as this fit with consumer duty because it doesn't seem fair to me. Bad credit isn't like Covid: you can't catch it from someone else. You don't choose who you fall in love with, so for a young first-time buyer to be barred from getting on with their life is disgusting. The regulator needs to shine a light on these types of practices and stop them from happening.”
But other brokers came out in defence of the policy.
Gary Bush, financial adviser at the Potters Bar-based MortgageShop.com, said: “Lenders basically have the right to refuse to fund a property purchase if it is evidenced that a financial association exists that could potentially be to the detriment of the lender.
“As the lender is taking on the risk and lending the money it is a device that they can fall back on if they see that this could cause them troubles with satisfactory repayment arrangements. “
While Scott Taylor-Barr, director of Leicester-based broker Barnsdale Financial Management, thought lenders would have “many examples” of cases where they have lost money in this type of situation.
