Had a mortgage application rejected by Halifax? No problem - we’re here to help. Just because you’ve been declined by one lender, doesn’t mean your journey to homeownership has to come to an end.
Every mortgage provider works to different eligibility criteria, and depending on your circumstances, some will be a better fit for you than others. Mainstream banks such as Halifax might seem an obvious choice, but in reality there could be far more suitable options out there.
Continue scrolling to find out what to do if Halifax declines your mortgage, and how an independent broker can help you renegotiate, or source a more suitable deal.
Who can get a mortgage with Halifax?
Halifax strives to accommodate a wide range of customer types, with particular emphasis on first-time buyers.
They offer high loan-to-value (LTV) mortgages and participate in a range of government schemes, including Help to Buy and Shared Ownership. There are also generous lending options of up to five times salary mortgages available for the right customer.
But like most high street banks, lending criteria is stringent and those that fall outside the parameters are likely to be rejected. Newly self-employed borrowers or those who have experienced severe forms of bad credit in particular are unlikely to meet the requirements.
Why do Halifax decline mortgage applications?
Bad credit is a common stumbling block for prospective borrowers, and it can be even more disappointing if you’ve already been offered an agreement in principle (AIP) by Halifax.
The reason this offer can be seemingly ‘revoked’ later on is often down to the fact that lenders only conduct soft credit checks, alongside the information you’ve provided, when issuing AIPs. During underwriting, hard credit checks are carried out, which will unearth the full extent of your credit history. If new information comes to light that doesn’t meet the lending criteria, your application may be declined.
Common types of bad credit which may not be accepted by Halifax include bankruptcies, county court judgements (CCJs), individual voluntary agreements (IVAs) and mortgage arrears - although this is discretionary, and how long ago the instance occurred and your other circumstances will be taken into account.
Halifax don’t tend to offer lower than 85% loan-to-value (LTV) residential mortgages, meaning borrowers will need a minimum of 15% deposit towards their home or face rejection. If you pose a risk in other areas (e.g. poor credit or low income), deposit requirements may be higher.
The only exception are first-time buyer (FTB) deals, which Halifax brought back earlier this year after the crackdown in 2020. Eligible FTBs may apply for up to 95% LTV mortgages, although it’s advisable to set aside as much as you can afford for access to the most competitive rates.
Halifax cap their lending at 4.75 times the applicant(s) income, but the allowance isn’t as generous for every borrower. If you used this figure as a benchmark, you may have received a rejection if you applied for a particularly large mortgage (loans over £500,000 are capped at four times your income) or are a Help to Buy Mortgage Guarantee applicant (limited to 4.5 income multiple).
Halifax’s affordability assessments also take your fixed monthly outgoings into account, and most lenders prefer borrowers to have a DTI ratio of 36% or less. If your outgoings are particularly high or you exceed the DTI requirements, Halifax may limit the amount you’re able to borrow or decline your application altogether.
While mortgage providers are becoming more accepting of self-employed applicants, many require applicants to have been trading for at least a year or two.
Halifax require self-employed borrowers to have a minimum of 12 months’ trading history (ideally two years) and corresponding evidence of your earnings (SA302s and bank statements). If you’ve recently become self-employed, this could well be the reason you’ve received a mortgage rejection from Halifax.
Issues with the property
Before a mortgage provider agrees to lend you a large sum of money, they need to make sure that the property is suitable security for the loan. Surveyor checks can unearth property issues which don’t meet the lender’s criteria and result in your mortgage being rejected.
Halifax accepts a number of ‘non-standard’ construction types, although each property will be assessed on its own merits. However, some are specifically excluded, such as those with load bearing panels of asbestos or gypsum plaster, and those which have been deemed ‘structurally unsound’ or ‘uninsurable’.
Other issues, such as the property being built on contaminated land or where Japanese Knotweed is present may impact mortgage eligibility, but Halifax will likely assess the severity of the issue and whether the property offers suitable mortgage security after a more in-depth report and remedial quote have been provided.
There are a plethora of other less common reasons Halifax may reject a mortgage application, and an full list of their mortgage lending criteria can be found on their website.
A few examples of situations which may result in a mortgage rejection from Halifax include:
Income derived from foreign currency, Housing Benefit, gambling, Airbnb or lodger income.
Having no credit history.
Exceeding the maximum mortgage age.
Insufficient identity documents.
Mistakes / discrepancies in paperwork / supporting evidence.
What to do if your mortgage is declined by Halifax
If you’ve been refused a mortgage with Halifax, or any lender for that matter, there are a few steps you should take to ensure you’re in with your best chance of approval next time around.
Resist the urge to reapply immediately
As tempting as it is, you’ll probably do more harm than good if you submit another mortgage application straight after receiving a rejection, either with the same or a different lender.
For one, too many applications for any type of finance within a short space of time can be detrimental to your credit file, and can be a red flag to future lenders.
Secondly, there’s a reason it was declined - reapplying with the exact same information without finding out the reasons may well result in the same outcome next time around. Which leads us on to…
Find out why you were refused
If Halifax hasn't already given you a reason for refusing you a mortgage, ask them. Not every lender will get back to you, but it’s certainly worth a try so you know what to look out for with subsequent applications.
Some of the most common reasons Halifax decline borrowers are due to credit or affordability issues. If you know or suspect it’s due to the former, access your credit reports from a tool like checkmyfile to understand the issue yourself. If you've failed the affordability assessment, have a think about how you might be able to reduce your monthly outgoings.
If the issue surrounds the property itself, ask for a copy of the surveyor’s report. It could transpire that it isn't worth what you were going to pay, or else unearth issues that make you rethink the purchase.
Make yourself more attractive to lenders
Once you’ve established why you’ve been refused a mortgage, you can work on addressing the issues to make yourself a more attractive prospect next time you apply. Regardless of the circumstances, seemingly small changes may give you access to more competitive rates across the board.
It’s easy to fall short when it comes to mortgage affordability assessments, because many borrowers neglect to factor their outgoings into the mix. Most lenders like to see a debt-to-income (DTI) ratio of 36% or less, so if affordability is the reason you’ve been rejected by Halifax, take a look at your finances and see whether there are any opportunities to decrease your living costs.
If your credit file needs work there may not be one single quick fix, but there are plenty of ways to boost your score in the longer term. Start off small by ensuring all your regular outgoings are paid off on time in full, and try to lower your credit utilisation to under 50% each month. If you have significant outstanding debt, try and clear some of it before reapplying for a mortgage.
Applying for a lower loan-to-value (LTV) reduces the financial risk for lenders and can work wonders for a mortgage application, especially if you’ve only narrowly missed the cut. Consider whether you can afford to contribute more deposit yourself, or look into the government schemes available to see if you’re eligible for a helping hand.
Don’t lose hope
Finally, try not to lose faith if you’re refused a mortgage by Halifax - the chances are a more suitable lender is out there waiting for you, and an independent mortgage broker is perfectly placed to seek them out!
Speak to a broker for advice after a mortgage rejection
Having a mortgage declined can be a kick in the teeth, but rest assured there may still be options available if Halifax have rejected your application.
At The Mortgage Hut, we pride ourselves in securing competitive mortgages for customers who have previously been turned away by lenders or brokers. Our team of expert advisors deal with this kind of thing every day, and are here to help.
Whether that’s identifying the root cause of the rejection, helping you address problems areas, identifying a more suitable lender or renegotiating with Halifax, our expertise and extensive panel of lenders, we’re confident we can secure you a competitive mortgage deal.
Tell us a bit more about yourself and your situation via our online enquiry form, or give us a call on 023 8098 0304 to speak to an advisor today. Being rejected by Halifax could have been a blessing in disguise!