'Computer says no' culture blights housing sales

The ‘computer says no’ mentality is blighting the mortgage market and holding back house sales.

New research has revealed the startling extent to which banks and building societies rely on computers rather than individual underwriters to assess mortgage applications.

Of the 200 mortgage brokers throughout the UK who were asked what percentage of mortgage inquiries had been declined over the past six months because their clients did not achieve a sufficiently high credit score, almost all (88%) said their clients were regularly declined by lenders’ automated credit scoring systems.

Colin Snowdon, chief executive of Aldermore’s specialist mortgage lending business, on whose behalf the research was carried out, said: “Many people will be shocked by the extent to which lenders, most of whom let skilled staff go during the recession, are now overly reliant on technology to make important lending decisions. They now have no other way of sorting the wheat from the chaff.

“Perfectly creditworthy borrowers are being told ‘no’ on a regular basis.”
 
Aldermore, which does not use credit scoring, preferring to let underwriting staff apply sensible rules and criteria, says the factors which can cause creditworthy borrowers to be rejected by credit scoring systems include:

* not being on the electoral role because of a recent house move
* a recent job change
* minor historic credit issues, even if they have been satisfactorily resolved
* being self-employed
* having income from several sources
* living in rented accommodation
* never having had a loan or credit card

Snowdon added: “Many banks and building societies have lost their appetite to lend and are using credit scoring as a blunt tool to identify only those borrowers who conform to their standardised credit profile.”

The research was conducted by an independent firm between July 14 and 18.