Yahoo Finance How a £10 bet on the Grand National could cost you your mortgage
Many people fancy an occasional flutter, but while a £10 bet on the Grand National or a fiver on England to actually win a penalty shootout at the Euros may seem harmless, it could affect your chances of getting a mortgage.
The cost-of-living crisis has already made lenders cautious. And many have imposed tougher affordability requirements since the 2008 financial crisis to comply with strict financial regulations and ensure borrowers can keep up with repayments if interest rates rise.
Typically, this has meant lenders being nervous about borrowers with high levels of debt, such as excessive credit card spending.
However, mortgage brokers are increasingly seeing issues raised when it comes to gambling.
This guide explains how gambling transactions could affect a mortgage application, and what to do if you want to borrow but have a history of gambling.
How do lenders view gambling transactions?
Gary Bush, financial adviser at www.MortgageShop.com, said underwriters are now becoming very analytical over applicants with gambling transactions on their bank statements.
He said: “The sight of gambling entries on bank statements weighs far more heavily with decision makers than applicants’ online spending activities nowadays.
“Even a small flutter on the Grand National doesn’t get past them at times.”
Mr Bush said it has become so much of a problem that his advisory firm has created an automated analysis system that trains its open banking feeds to spot transactions with the main bookies.
He added: “If the amount spent in a given month is greater than a certain percentage of the applicant’s monthly income it emails them advising that this activity can lead to more negative decisions from banks and building societies.”
Will gambling transactions harm a mortgage application?
There are lots of factors that lenders consider in a mortgage application. This includes your income, age, location and also your lifestyle.
All lenders have eligibility criteria, be that on income or expenditure but it can be more complicated when it comes to gambling.
Danny Belton, head of lending at Mortgage Advice Bureau, said: “Some lenders will allow an application that has been gambling responsibly, using their own money and not going into debt to fund this, but others have a much stricter approach to it and could deny an applicant with any gambling transactions. This means they might refuse to lend as much, or any money at all.
“Ultimately, the lender will assess whether the gambling behaviour could affect their ability to make timely mortgage payments, and whether it poses a significant risk to the lender’s investment.”
Mortgage underwriters are looking for trends that could give them a clue about future conduct and how responsible you will be as a borrower.
Andrew Montlake, managing director of mortgage brokers Coreco, said: “That is where regular online gambling accounts could present an underwriter with if not a red, but a yellow flag.
“We have seen examples where bank statements riddled with gambling debits lead to declines from certain lenders, while others may take a more lenient view if the account itself is still well within limits.”
A lender’s decision on how they treat gambling may depend on how habitual or excessive it is. The issue is that lenders may have different definitions of what “excessive” looks like.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Excessive may be regarded as greater than 10pc of the client’s allowable income on the bank statements provided; if this is the case, the lender may then factor in 3pc of the gambling as a commitment.
“Furthermore, as a duty of care to the borrower/client, this may lead to additional questioning as it may be a sign of a vulnerable client.”
How to get a mortgage if you have a history of gambling transactions
Getting your finances in order is a key aspect to any successful mortgage application.
Lenders will want to see three to six months of bank statements to get an idea of your debts, income and expenditure, in order to weigh up whether they’re confident you can afford the loan you are applying for.
Mr Montlake added that borrowers should start preparing several months before taking out a mortgage to ensure their accounts are in good order.
David Hollingworth, associate director at London & Country Mortgages, said the occasional bet may not have an impact, but regular flutters could cause the lender to ask questions.
He said: “It could be flagged by a lender as something that would need to be factored into affordability. That could therefore have an impact on the amount that could be borrowed or even for the lender to decline the application if the gambling is habitual.”
To avoid this, it may be worth reducing your gambling in the run up to an application.
Mr Hollingworth added: “Just as the use of a payday loan can raise concerns for a lender, the use of gambling could come up, so those planning to make an application may prefer to avoid transactions altogether in the run up.”
Gambling does not in itself automatically disqualify an applicant from getting a mortgage, so you may not have to worry about the odd bet.
But banking trade body UK Finance said lenders must follow strict regulatory requirements to ensure that borrowers can afford to repay their mortgage.
Karina Hutchins, principal, mortgage policy at UK Finance, said: “As part of a mortgage lender’s affordability assessment, they may look for signs of problem gambling.
“Betting on the odd football game or horse race is unlikely to be an issue, but if an applicant bets daily and spends huge amounts of money gambling every week, this is likely to raise concerns about whether they’ll also be able to afford the cost of their mortgage.
“I would encourage anyone who is worried about qualifying for a mortgage to speak to an independent mortgage adviser, who will be able to provide them with tailored advice specific to their circumstances.”
