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Can I get a mortgage with a default?

Mortgage lenders will generally accept most mortgage applications with up to two defaults even if they are within the past 2 years. If you’ve got a default that is more than 2 years old then you’ll generally have no issues with your mortgage application.

This independent expert guide is aimed at helping people with defaults to get the best mortgage deals. Millions of households in the UK experience some sort of credit problem every year, and defaults are one of those common credit issues.

According to a recent survey from the Bank of England, high street lenders were expecting the sharpest rise in defaults in unsecured borrowing since 2009. Figures from Threadneedle Street showed that banks were expecting a significant increase in 2024 in the number of households who will miss repayments on loans, credit cards, and other unsecured debts.

Mortgages with defaults are common in the UK, and there are actually plenty of different options for mortgage borrowers with defaults, especially if they are for smaller amounts or more than 2 years old. One of the most important points about getting a mortgage with a default is making sure that you apply to the best lender who will offer the lowest rates for your credit history, so you don’t pay a higher interest rate.

It’s often easier than you might think to apply for a mortgage with a default and you can even get competitive rates from the top mortgage lenders. The most important thing is to make sure that you get proper mortgage advice from a qualified expert, which will ultimately help to save you time and money. https://www.bankofengland.co.uk/credit-conditions-survey/2023/2023-q4

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60-Second Summary – Can I get a mortgage with a default?

One of the most common questions for mortgage borrowers in the current economic climate and a cost of living crisis is ‘can I get a mortgage with a default?”. A recent survey suggested that over 25% of lenders were seeing default rates increasing on unsecured borrowing in the UK so far in 2024.

One of the most common credit problems in the UK is defaults on unsecured credit, such as loans, credit cards and other forms of unsecured borrowing.

  • Most mortgage lenders in the UK will consider a mortgage application for a borrower with a default on their credit report, and other forms of poor credit.
  • Defaults are not always the borrowers fault and you are well within your rights to be able to question whether the default on your credit report is fair and correct.
  • Mortgages with defaults can be similar to high street mortgage rates and it is also possible to get standard mortgage deals with defaults on your credit file, especially if they are over 2 years old.
  • Some mortgage lenders will disregard defaults on a mortgage application if they fit in to a lenders mortgage criteria (e.g. under £250, less than 3, or more than 2 years old).

In this section, we answer your most common questions about ‘can I get a mortgage with a default?’ and explain how to get the best deals.

Yes you can get a mortgage with a default and often there are very competitive mortgage rates for people with defaults. There are a number of things to think about with this type of mortgage application and ways for you to save money with lower interest rates.

Mortgage with defaults will ultimately depend on a number of key areas, including:

  • What was the date of the default? Generally defaults that are more than 2 years old will be disregarded with most mortgage lenders.
  • How many defaults do you have? Borrowers with one or two defaults are usually considered to be a standard risk.
  • What was the value of the defaults? Most lenders are not concerned about defaults that are for £200 or below, and multiple defaults with a combined value below £400.
  • Have your defaults been satisfied? Mortgage lenders can sometimes disregard defaults if they’ve been satisfied or settled.
  • Which type of finance or credit was the default applied to? Some finance or credit agreements are considered to be less severe than others (e.g. telephone contracts, telecoms companies or mobile phone contracts).

Each mortgage lender has its own criteria for mortgages with defaults and they will usually treat each application on its own merit. A good mortgage broker will know which lenders are best for you based on your credit history and your affordability.

Types of mortgages available for people with defaults:

There are lots of different options and various elements when you apply for a mortgage with defaults, and this is why it can be important to get proper advice from a qualified mortgage specialist.

Note: It is useful to check if you have a default recorded on your credit report using credit reference agencies such as Experian. Generally improving your credit score will affect your credit report and can help with getting a mortgage.

Defaults can be fairly common for people in the UK and it’s not unusual for people to apply for mortgages with defaults on their credit report. People borrow money for various reasons, and occasionally a monthly payment can be missed when repaying this.

A default shows as a ‘D’ on your credit history which is where you have a credit agreement in place and several payments have been missed. Borrowers will usually get a default applied to a credit facility if there have been 3 or more missed payments on the account.

There can be a number of reasons for getting a default and it can happen where it is not your fault (e.g. change of payment details, change of contact details, administration errors, system problems etc.).

In this interview on ITV’s This Morning, financial journalist Martin Lewis discusses the best first steps for dealing with debt and credit issues and free resources that can help (e.g. Citizen’s Advice).

How Do I Start Repaying My Debt? | This Morning

Note: If you receive a default notice and you think it is incorrect, you should check when the ‘default’ occurred and address this as soon as possible.

It is also possible to speak to the credit company or lenders and to arrange for them to remove a default, if it has been applied unfairly or incorrectly. There is a process to go through to remove a default and it can take several weeks or even months for this to happen.

To remove a default, you must be able to provide evidence that it is incorrect or unfair and you must contact the finance company. It is then down to their discretion whether they would agree to have it removed or not.

How can I get a mortgage with a default?

There are several steps that you should follow when you’re looking for a mortgage with a default, or if you find out that you’ve got a default. These steps can help you to save a lot of time with your mortgage application and can save you £1,000’s in interest.

  1. Get you credit file or credit history: You can usually get a copy of your credit report for free by creating an account on one of the free apps that are available (e.g. ClearScore, Check My File, TotallyMoney, or Credit Karma).
  2. Establish whether your default is valid: If you think that your default isn’t correct or it is unfair, then you can contact the credit provider to question the default. You might be able to get the default removed if it has been applied incorrectly or unfairly.
  3. Satisfy your default (if possible): Lenders will look more favourably at satisfied defaults and you could get a better mortgage rate if you’ve paid it off.
  4. Speak to a default mortgage specialist: Getting the best advice and guidance from a specialist who is used to dealing with default mortgage applications will help to improve your chances of getting lower rates and being accepted.
  5. Compare default mortgage deals and do your research: it’s important to do your research and make sure that you’re getting a good deal or a good rate for your mortgage with a default.

WARNING: Be careful with getting credit reports and credit searches when you’re applying for a mortgage with a default, especially if you get declined or refused. Mortgage lenders don’t like mortgage applications with too many credit searches in the past few weeks or months, and so it’s important not to fall in to the trap of making lots of applications.

Getting a mortgage with a default will almost certainly cause extra questions and potentially some problems when applying for a mortgage. While it’s possible and sometimes fairly straightforward to get a mortgage with a default, it will also depend on the situation and other factors.

Here are some of the main things to think about when applying for a mortgage with a default, and ways to help save you save time and money.

Top questions to think about when applying for a mortgage with a default:

What date was the default recorded?

Mortgage rates and the number of options that are available will automatically improve with older defaults. Recent defaults and other credit problems will be considered to be a higher risk to mortgage lenders.

Mortgages with defaults are considered on a timeline from the date that they are registered and/or satisfied:

Time since default was registered  Default mortgage rates and outcomes
0 to 3 monthsCan cause some issues with some lenders and can increase rates, especially if not satisfied or more than £250. Some lenders might not lend with defaults this recent.
3 to 12 monthsWill be considered slightly less severe and more lenders will consider older defaults. Can be more serious if the default is still not satisfied or over £250 in value.
1 to 2 yearsMost lenders will consider mortgages with defaults over 12 months old, but rates can vary for defaults over £250 or if there are multiple defaults, especially if not satisfied.
2 to 6 yearsAlmost all lenders will consider mortgages with defaults over 2 years old. Most  defaults will be disregarded if they are over 2 years old, unless there are multiple defaults or more than £250 in value, or still not satisfied (less likely for older defaults).
Over 6 yearsAll defaults over 6 years old will be disregarded and will no longer appear on your credit report, so they cannot be considered.

Lenders criteria for mortgages with defaults are constantly changing and so it’s sometimes difficult to keep track of exactly what the latest rules are. A default mortgage specialist should have all of the most up to date information for your mortgage application to get the best rates and deals.

How many defaults have you got?

Mortgages with defaults will also be assessed based on the number of defaults that you have on your credit report, as well as when they were registered. There are some general rules that apply to most mortgage lenders for defaults, but these rules can vary from time to time.

Most lenders will generally accept multiple defaults as long as there aren’t too many within a certain period of time. Some lender rules for mortgages with defaults can be, 2 in the last 12 months and none in the past 3 months.

How much are the defaults worth (£’s)?

The simple fact is that mortgage lenders will consider higher value defaults as more serious in most cases, especially if they are recent and unsatisfied. As a rule, mortgages with defaults under the value of £250 or a combined value of £500 are usually less serious.

Any defaults under the value of £50 are likely to be disregarded in most mortgage applications, unless there is something else to consider.

The worst scenario is a mortgage default which is obviously going to be high value and is mortgage related, and these are usually a more serious issue.

Has your default been satisfied?

It is always advisable to make sure that any outstanding defaults are satisfied or paid off where possible. Obviously, this isn’t always possible but your options can be limited for mortgages with defaults that are outstanding.

A satisfied default will usually show as an ‘S’ on your credit report and generally will be applied once the defaulted debt has been paid off. Some mortgage lenders won’t consider an application unless the default has been cleared.

Which type of credit or finance was the default applied to?

Mortgage lenders will also consider some defaults to be more serious than others, and some won’t even be considered at all. There are several different types of credit or finance agreements which will be either short, medium, or a long term agreement.

Short term agreements such as Mobile phone or telecoms contracts will often be considered to be lower risk and sometimes even disregarded.

Medium term agreements such as loans and credit cards can be more serious and will depend on the value of the default.

Long term agreements such as secured loans or mortgages are generally considered to be more serious (especially mortgage defaults), but these are more rare.

A default will stay on your credit file for 6 years from the date that the default first occurred. While you can repay the debt or fix this if it was an error, the default will remain on your file.

If the default was due to an error, it’s best to contact the bank, lender etc. as soon as possible. Having proof that the default did not actually occur can be useful when speaking with mortgage lenders. 

The best mortgage lenders with default will depend on your financial circumstances and the details of the whole mortgage application. This is where a default mortgage specialist would be best to help you to find the best mortgage lender based on your mortgage application.

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Mortgages with defaults are often available from the top 6 high street mortgage lenders and some specialist lenders for more complicated credit problems. The best lenders for mortgages with defaults will really depend on your financial circumstances and credit history.

The standard minimum deposit for mortgages with defaults is 15% of the value of the property or purchase price. For a remortgage, you would usually be able to get a mortgage for up to 85% of the value of the property or Loan to Value (LTV).

Example:

Purchase price or property value: £200,000

Maximum mortgage with default: £170,000 (85% Loan to Value)

Minimum deposit required: £30,000 (15% deposit)

Note: Lower Loan to Value mortgages or bigger deposits would usually improve your chances of your mortgage with defaults being approved and getting lower interest rates.

It is also potentially likely that you will pay a higher interest rate on your mortgage if you have a default in your credit history, especially more recent and bigger amounts. The interest rate for mortgages with defaults compared to standard mortgages will sometimes be between 1% and 2% higher.

The mortgage interest rate will depend on:

  • How recently the default(s) are registered
  • Type of default (satisfied or unsatisfied)
  • What was the value of the default(s)
  • Number of defaults

You can also potentially secure a lower mortgage interest rate with a default by speaking to a qualified mortgage specialist.

We provide the latest and most up to date free independent guidance to millions of households all over the UK. Our team of independent mortgage experts provides free information and support to help you to save time and money on your mortgages.

Our qualified bad credit mortgage specialists have years of experience and expertise with helping thousands of households to get the best mortgage deals with defaults.

To speak to one of our qualified mortgage experts you can contact us free on 0800 009 6559 or CLICK HERE to submit a free enquiry.