Thousands of people hoping to buy their first home may be delaying their plans because they’ve convinced themselves a mortgage lender will say no. Lloyds Banking Group, which owns Halifax, says misconceptions about debt, deposits and credit checks are causing would-be buyers to “rule themselves out” before they even apply.
New Lloyds research suggests a large chunk of first-time buyers are working to assumptions that simply don’t match how mortgage decisions are made. The bank says lenders typically look at the overall picture – income, outgoings, credit history and affordability – rather than rejecting someone automatically because of one part of their finances.
Common fears that may not be deal-breakers
The survey found 58% believe having existing debt would stop them getting a mortgage, while 37% think a 20% deposit is essential. Around 40% think being in an overdraft would definitely count against them, 38% believe claiming benefits would prevent approval, and 31% think a recent job change would put home ownership out of reach.
Lloyds said many of the issues people fear are “automatic” deal-breakers are not, in most cases, immediate disqualifiers – although every application is still assessed on individual circumstances, with affordability and eligibility checks.
The research also highlighted factors prospective buyers wrongly believe would automatically prevent them from getting a mortgage, including being on a zero-hours contract (54%), not having a perfect credit score (30%), earning under £50,000 (27%), being self-employed (24%) and using Buy Now Pay Later (21%). A further 20% thought maternity or paternity leave would rule them out, while 13% believed student loan debt would stop them.
£5,000 deposit mortgage
In a move aimed at tackling deposit fears, Lloyds has introduced a mortgage that allows eligible first-time buyers to put down a £5,000 deposit on homes worth up to £300,000. The deal is available through Lloyds and Halifax, as well as brokers, and can allow borrowing of up to 98% of the property’s value. It is subject to checks, including a maximum loan-to-income ratio of 4.5 times earnings, along with other eligibility requirements.
The bank has also pointed out that saving a bigger deposit can still help, because it reduces the amount borrowed and may lower monthly repayments and improve rates.
Debt and credit scores
Lloyds said debt is widely misunderstood. Having a student loan, credit card balance, car finance or an overdraft does not automatically block a mortgage – instead, lenders typically consider whether repayments are manageable alongside the proposed mortgage and other commitments.
It also stressed there is no single “perfect” credit score that guarantees acceptance, with lenders looking at someone’s overall financial history rather than applying a simple pass-or-fail number. Self-employed applicants can also get mortgages, though they may need to provide more evidence of income.
Putting life plans on hold
The bank’s findings suggest mortgage uncertainty is affecting day-to-day decisions too. More than a third (37%) said the prospect of being rejected is a major worry, while 53% said they had delayed or abandoned life milestones while trying to save for a home.
That included 28% delaying or giving up travelling, 15% putting off buying a car, 14% delaying marriage and 14% delaying having children. Almost two-thirds (64%) said they had cut everyday spending to build a deposit. Holidays were the most common sacrifice (46%), followed by eating out (41%) and buying new clothes (39%).
The research also found some people view buying a first home as harder than other big challenges – 27% said learning a new language felt more achievable, one in five said running a marathon or writing a book seemed easier, and 9% said winning Gladiators would be more achievable than buying a home.
Lloyds has partnered with Gladiators star and first-time homeowner Livi Sheldon, also known as Diamond, as part of its push to challenge the myths.
Amanda Bryden, Head of Mortgages at Lloyds, said: “Buying your first home can feel overwhelming, especially when you're trying to save for a deposit while balancing everyday costs and other life goals. Our research shows many aspiring first-time buyers believe they need to be debt-free, have a perfect credit record or save a 20% deposit before they can even think about getting a mortgage.
“In reality, mortgage decisions are based on a much broader picture of your finances and circumstances. While affordability is important, don’t rule yourself out because of misconceptions about what lenders look for.”
Livi Sheldon said: “Buying my first home was an incredible milestone, but I know how easy it is to look at the challenges involved and wonder whether it's achievable. A lot of people assume they need everything to be perfect before they can even think about getting a mortgage, but that's not necessarily the case. Talking to experts and understanding your options can make a huge difference.”
Lloyds added that while certain factors may not lead to an automatic rejection, that does not mean every applicant will qualify. Mortgage providers still carry out affordability, credit and eligibility checks, and borrowers must be confident they can meet repayments now and in the future.
