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Help to Buy rules get tougher as couples forced to jointly apply

Written by: Samantha Partington
Mortgage advisers are reporting that first-time buyers are facing stricter rules under the new Help to Buy scheme that prevent a married or co-habiting couple from applying for a mortgage in one name, because the other partner has credit issues.

Unlike the outgoing scheme, Help to Buy agents are not allowing married or cohabiting couples to apply in a sole name if it could ease the application through. The only exception to this rule, according to feedback received by brokers, is when the application is being made in a sole name for “faith-based or religious reasons”.

Under the rules of the old scheme although couples were supposed to apply in joint names, if one partner had an issue with their credit file they were allowed to remain off the loan. Partners were also allowed to remain off the application if their age or other personal circumstances would make the mortgage more expensive or unviable.

Although the new first-time buyer-only scheme has only been open for reservations since 16 December, the change in the rules has already led to first-time buyers who could afford the mortgage based on one applicant’s earnings being turned away.

Mortgage Solutions asked Homes England why the policy, which is laid out by the Ministry for Housing Communities and Local Government, has been tightened but it refused to acknowledge that creditworthiness was no longer accepted as reason to remain off the loan and described the broker claims of rejected cases as “inaccurate”.

Matt Coulson, director of Heron Financial, said his firm has already had three cases that could not proceed because this exception had been removed.

“No longer allowing married borrowers to apply in one name because the applicant has credit issues is a key change in our point of view,” he said. “It has already had an effect, and certain applicants have not been able to proceed.

“It’s a very common scenario to have one applicant with an A-rated credit file who can support the mortgage alone and the other with credit issues, particularly in the last 12 months, where the pandemic has put pressure on personal finances.

“We called up recently to speak to different Help to Buy agents to challenge the situation and have been told each time under no other circumstances, except for faith-based or religious reasons, can a joint application be avoided. They keep pointing us back to the rules which don’t allow creditworthiness as an exception.

“A lot of the changes to the way Help to Buy works have been viewed positively and have meant that the scheme is more useful for those who need it the most, like introducing regional price caps and limiting use to first-time buyers. But this niche policy change does not feel like it is in the spirit of the scheme, and as a result first-time buyers are being unduly penalised.”

Another broker firm, that did not wish to be named, told Mortgage Solutions it had recently had a case rejected under the same circumstances.

Matt Poole, director of Poole Family Financial, said it has always been tricky to get a bank to offer a mortgage to one half of a couple because the other has had past credit issues, but this option should still be available to borrowers.

“Each application should be assessed on its own merits,” said Poole. “The credit problems could have come about during a previous marriage or relationship and while they are still on the credit file, no longer reflect the current circumstances. Help to Buy agents and mortgage lenders need to use common sense and understand the back story. There should be flexibility in the rules.”

A spokesperson for the department said: “The new Help to Buy: Equity Loan (2021-2023) helps those who need it most, first-time buyers. As an entirely new scheme, it is subject to brand new terms and conditions.

“Given the first-time buyer only eligibility of the new scheme, it is reasonable that couples are expected to jointly apply whether they are married or cohabiting.

“In exceptional circumstances where the first-charge lender, for example, is only lending to one person we will consider approvals on a case-by-case basis subject to both parties signing the declaration that they are a first-time buyer.”

But when asked by Mortgage Solutions if creditworthiness was an exceptional circumstance that would be considered on a case by case basis, Homes England refused to comment.

It is understood that Homes England is developing further guidance to help brokers and customers.

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