New data has been released
Rejections are up(Image: urbazon via Getty Images)
Was your mortgage declined? Lenders have reported that the proportion of mortgage applications being approved fell for a second consecutive quarter, recording a Bank of England net balance of -10.5 in the third quarter of 2026 after -8.0 in the previous three months.
A net balance below zero means more lenders reported approving a smaller share of applications than reported approving a larger one. That followed a reading of +22.9 at the start of the year, when lenders were approving a growing share, the second-highest figure in the 19-year history of the Bank of England’s Credit Conditions Survey.
In other words, the share of applications being approved has swung from a near-record high to a decline within the same year and the change has been particularly sharp for borrowers with deposits of less than 25%. Lenders reported that mortgages for buyers with deposits under 25% became much harder to get – a net balance of −19.9, from −2.2 the previous quarter.
At the same time they said the borrowers they did approve were lower-risk than before (+6.5), which suggests the people closest to lenders’ affordability limits are the ones being turned away. The Newspage research, sponsored by Charwin Mortgages, found that borrowers are being rejected despite lenders apparently making some of their rules more generous.
The Bank of England’s latest Credit Conditions Survey shows lenders said they were willing to lend more relative to a borrower’s income – a net balance of +9.2 for maximum loan-to-income limits. But the overall availability of mortgages fell and lenders approved a smaller proportion of applications.
Affordability failures
Mortgage brokers said the apparent contradiction reflected the gap between lenders loosening headline criteria and borrowers passing a full affordability assessment at current mortgage rates. Higher monthly payments, unsecured debts, irregular income, bank-statement activity, property problems and differences between lenders’ internal scoring models can still result in an application being rejected.
Ranald Mitchell, director of Norwich-based Charwin Mortgages, said: “Mortgage declines are rarely about one big red flag, they are usually where several smaller risks stack up and the lender’s model says no. Right now affordability is the biggest pressure point, followed by credit history and then the detail of the case itself, income structure, deposit, property type or spending patterns.
“Declines are also frequent simply because the borrower has gone to the wrong lender. The same case can be declined by one bank and accepted by another because criteria and scorecards vary so much. A good credit score and decent salary are no guarantee.
“The biggest mistake after a decline is firing off another application blindly. Find out why it failed, fix the weak point and choose the next lender properly. Very often, a decline is a lender-selection problem as much as a borrower problem.”
Decision in principle not a guarantee
Matt Coulson, founder of Rickmansworth-based Heron Financial, said looser rules didn’t necessarily mean approvals would rise and warned that a decision in principle (also called an agreement in principle, or AIP) is no guarantee.
He added: “The paradox makes sense once you look past the rules. Criteria have loosened on paper, but money has got dearer, so people still fail affordability, unable to service the loan at today’s rates.
“Looser rules don’t help if the payment is too high. In order, the three most common reasons for a no are affordability, then the credit file, often missed payments or too much unsecured and buy-now-pay-later debt, then income that doesn’t fit the lender’s boxes, like self-employed, bonus or contract pay.
“A decision in principle lulls people too. It’s a soft check on headline numbers, so a yes there and a no later is common and rising, once the full application examines the bank statements, credit file and valuation.
“Plenty with good credit and a steady job still get declined, usually down to how they’re paid or the property, and a broker can often place that case elsewhere. If you’re declined, find out why first. Firing in more applications leaves footprints and makes the next one harder.”
Wrong lender
One expert believes borrowers could be rejected simply because they approached the wrong lender.
Babek Ismayil, founder and CEO aof London-based OneDome, said: “A mortgage rejection doesn’t always mean you can’t afford the property. It can mean you’ve approached a lender whose criteria don’t suit your circumstances.
“What many buyers don’t realise is that lenders can assess the exact same income, debts and spending habits very differently. Before making another application, ask your broker to obtain the specific reason for the decline and check your circumstances against alternative lenders’ criteria, ideally using eligibility checks that don’t affect your credit score.
“Even something as simple as how overtime, bonuses, or self employed income is assessed can change the outcome. The solution isn’t necessarily a bigger deposit or a higher salary. Sometimes it’s finding a lender that understands your finances differently.”
Proper checks reduce chance
Most mortgage rejections could be avoided with proper checks before applying, according to one expert.
Craig Fish, director of London-based Lodestone Mortgages, said: “A mortgage decline is usually the end result of a process that went wrong right at the start, and most of them are avoidable. We do full due diligence on every case before a single application goes in: credit files pulled and read, bank statements reviewed line by line the way an underwriter will read them, and income tested against each lender’s actual criteria rather than its headline rules. Do that work up front and the lender rarely says no.
“Applications don’t fail at underwriting, they fail at preparation. In practice the only declines we see are property-related, where a valuation or survey turns up something nobody could have known beforehand.
“If you are declined, the worst move is firing off applications to other lenders and hoping one sticks, because every hard search sits on your credit file and lenders notice the pattern. The decline itself isn’t recorded, but the searches are. Stop, find out exactly why, and get whole of market advice before you go again, with a clear plan.”
Encouragingly, experts have reiterated that being rejected by one lender doesn’t mean you can’t get a mortgage elsewhere.
Stephen Perkins, managing director of Norwich-based Yellow Brick Mortgages, added: “A mortgage decline is often a lender saying ‘this case doesn’t fit us’, not the market saying ‘you cannot get a mortgage’. Affordability, credit history and the way income is earned are common reasons, but lender appetite and internal scoring can make a huge difference, too.
“We have seen from our own affordability research just how differently mainstream lenders can assess identical borrowers, so choosing the wrong lender at the outset can turn a perfectly viable case into a decline. The worst response is to immediately fire off another application without understanding what went wrong. Find out whether the issue was affordability, credit conduct, income, the property or simply that lender’s criteria, then reassess the market properly.
“A decline itself is not recorded on a credit file, but the searches associated with repeated applications can be, so blindly trying lender after lender can make matters worse rather than better.”
Some experts believe the biggest reason borrowers are being rejected is that higher rates have pushed monthly payments up.
Jamie Alexander, mortgage director at Romsey-based Alexander Southwell Mortgages, said: “Affordability is the biggest reason right now, followed by credit history and then the property itself. Rates have pushed payments up significantly and cases that sailed through two years ago are now borderline.
“The looser rules but fewer approvals paradox is not a contradiction. The applicant pool has changed. More people are stretching further, carrying more debt, and arriving with bank statements that tell a complicated story. Agreement in Principle (AIP) followed by decline is happening more often.
“Soft searches at AIP stage miss things a full application uncovers. Bank statements are where most cases unravel. Gambling transactions, buy now pay later, unexplained deposits.
“Underwriters are reading them closely. When someone is declined, the worst move is to immediately apply elsewhere. Multiple hard searches in quick succession make the next application harder. Understand why, fix what can be fixed and take proper advice before trying again.”
