Key Takeaways

• More than half of prospective first-time buyers surveyed incorrectly believe that existing debt automatically prevents them from obtaining a mortgage.
• Other widespread misconceptions concern zero-hours contracts, deposit requirements, overdrafts, benefits, employment changes and credit scores.
• The findings suggest that a lack of understanding about mortgage eligibility may discourage some potential buyers from applying for financing when they could potentially qualify.

More than half of prospective first-time buyers in Great Britain believe certain financial circumstances automatically prevent them from obtaining a mortgage, according to research published by Lloyds.

The survey, conducted by Find Out Now on behalf of Lloyds Banking Group, questioned more than 1,000 adults who planned to purchase their first home within five years. The results point to a significant information gap among people preparing to enter the housing market.

The largest misconception concerned existing debt. Some 58% of respondents believed that having outstanding debt would automatically disqualify them from receiving a mortgage. In practice, mortgage applications involve an assessment of an applicant’s overall financial circumstances rather than a single factor considered in isolation.

First-Time Buyers Are Unsure About Credit and Employment

The research found similar uncertainty around employment arrangements and credit history.

Some 54% of respondents believed that being employed on a zero-hours contract would automatically prevent them from securing a mortgage. Meanwhile, 30% believed that not having a perfect credit score would make them ineligible.

Other respondents incorrectly identified being self-employed as an automatic barrier, with 24% holding that belief. A further 31% thought that recently changing jobs would prevent them from obtaining a mortgage.

These perceptions can matter because first-time buyers may decide not to approach a lender if they believe their circumstances make an application impossible.

Deposit Requirements Are Also Misunderstood

Deposit expectations represented another significant misconception. Some 37% of those surveyed believed that buyers needed a 20% deposit to obtain a mortgage.

The research also found uncertainty around everyday banking circumstances. Forty percent believed that being in an overdraft would automatically prevent them from receiving mortgage finance, while 38% thought receiving benefits would make them ineligible.

For households already facing high property prices and borrowing costs, misunderstanding eligibility can add another barrier to entering the housing market.

Better Information Could Improve Access to Homeownership

The findings highlight the importance of financial education as prospective buyers prepare for one of the largest financial commitments of their lives.

Mortgage eligibility can depend on multiple aspects of a household’s financial position, meaning assumptions about individual circumstances may not provide an accurate picture of whether financing is available.

For banks, improving customer understanding can also have commercial significance. Clearer information about mortgage requirements could encourage more qualified customers to begin the application process while helping borrowers approach lenders with more realistic expectations.

As housing affordability remains a challenge, access to accurate information is becoming an increasingly important part of the home-buying process.

Closing Insights

The Lloyds research highlights that financial uncertainty is not always caused by a lack of access to credit; sometimes it begins with misconceptions about how credit decisions work.

For prospective homeowners, understanding the factors lenders consider can be more valuable than assuming a single financial issue automatically ends the possibility of obtaining a mortgage.

For banks, clearer communication can help reduce unnecessary barriers while strengthening relationships with the next generation of homeowners.

In a housing market where affordability remains difficult, better financial literacy could become an important part of expanding responsible access to homeownership.

For a confidential discussion regarding retail banking strategy, insurance distribution models, customer loyalty ecosystems, digital financial services, or cross-border financial innovation opportunities, contact our senior advisory team.