Prospective homeowners are changing their spending habits in order to make their mortgage applications more successful, research by MoneySuperMarket has found.
The survey of more than 2,000 people found that 20% of those planning to apply for a mortgage in the next 3 years will increase their use of cash to hide their purchases from the lender.
Additionally, 25% of applicants plan to cut down on spending by an average £159 each month.
The survey also found:
- 21% plan to make purchases on their credit card and clear the balance at the end of the month
- 29% say they will clear all their debts before applying
- 8% have never heard of the Mortgage Market Review (MMR).
Mortgage applicants have experienced tighter lending conditions over the past 12 months due to the MMR. The MMR requires banks to run detailed affordability checks applicants to provide more information about their spending.
Despite the MMR, recent data published by the Council of Mortgage Lenders showed that gross mortgage lending edged closer to 2008 levels last year. During 2014 around £204 billion was lent to homebuyers compared to the £254 billion lent in 2008.
Kevin Mountford, head of banking at MoneySuperMarket, said:
“Paying off debts is always a good way to start when it comes to applying for a mortgage as existing borrowing will be taken into account by a lender when it comes to your application. Reducing the amount you spend each month could also help when it comes to the amount a lender thinks you can afford to borrow.
“Those trying to ‘play’ the system should exercise caution as lenders may still require you to prove where your cash goes. Using a credit card to hide your spending may also count against you as lenders have access to your credit report.”