Credit card debts to further impact mortgage applications

May 17, 2016 by Brendan O'Neill

Lenders

Experts have expressed concerns about credit card limits being increased and the effect it could have on mortgage applications. According to a report published in The Mail, millions of people are being encouraged to take on more debt, resulting in cases where credit card limits have been increased without consent.

A lender may decide to reject a mortgage application if it thinks that a borrower has too much debt. This can also include the amount of credit which is available to a customer, as further borrowing could result in difficulty paying a mortgage.

The amount of credit which a lender considers to be acceptable varies, but may be as low as £30,000. This includes the amount of credit which is available to a borrower. As credit card companies often raise credit limits without a person realising, this could be a problem.

A credit company is required to provide 30 days’ notice to a customer before increasing a credit limit. The customer then has to contact the company to decline the offer, although most people don’t do so. According to research carried out by uSwitch, two thirds of people surveyed had received a credit limit increase without asking for it.

As lenders are required to check affordability before lending to a customer, extra credit may be a crucial factor. A high level of debt could result in a delay for the application, as the lender has to consider it in more detail.

Most mortgage advisers have taken the CeMAP exam, which means that they are qualified to assess debt levels, and can provide advice on how to increase the chances of being accepted for a mortgage.