Mortgage lenders are rejecting a growing proportion of applications, despite loosening some borrowing rules, as experts warn that higher repayments and stricter affordability checks are leaving buyers struggling to get approved.
The Bank of England's latest Credit Conditions Survey found that lenders reported a net balance of -10.5 for the proportion of mortgage applications approved in the third quarter of 2026, down from -8.0 in the previous three months.
A negative figure means more lenders reported approving a smaller share of applications than reported approving a larger share.
The latest reading marks a sharp reversal from the start of the year, when the figure stood at +22.9 – the second-highest reading in the survey's 19-year history.
Borrowers with deposits below 25% have faced particular difficulties, with lenders reporting a net balance of -19.9 for mortgage availability in this group, compared with -2.2 in the previous quarter.
Yet lenders also reported greater willingness to lend relative to borrowers' incomes, with a net balance of +9.2 for maximum loan-to-income limits.
So why are more applications being rejected?
Six reasons your mortgage could be declined
Mortgage experts say looser lending criteria do not guarantee approval. Lenders still assess whether borrowers can afford repayments, as well as examining their finances and the property they want to buy.
The most common reasons for rejection include:
- Affordability problems: Higher mortgage payments can mean applicants no longer meet a lender's affordability calculations.
- Credit history concerns: Missed payments, existing borrowing and buy-now-pay-later debts can affect an application.
- Irregular income: Self-employed earnings, bonuses, overtime and contract work may be assessed differently by different lenders.
- Bank statement transactions: Spending patterns, gambling transactions or unexplained deposits can prompt further scrutiny.
- Property issues: Valuations, surveys or the type of property can lead a lender to refuse a loan.
- Choosing the wrong lender: Banks and building societies use different criteria and internal scoring systems, meaning one may reject an applicant while another accepts them.
‘A good credit score and decent salary are no guarantee’
Ranald Mitchell, director at Charwin Mortgages, said: "Mortgage declines are rarely about one big red flag, they are usually where several smaller risks stack up and the lender’s model says no. Right now affordability is the biggest pressure point, followed by credit history and then the detail of the case itself, income structure, deposit, property type or spending patterns.
"Declines are also frequent simply because the borrower has gone to the wrong lender. The same case can be declined by one bank and accepted by another because criteria and scorecards vary so much. A good credit score and decent salary are no guarantee.
"The biggest mistake after a decline is firing off another application blindly. Find out why it failed, fix the weak point and choose the next lender properly. Very often, a decline is a lender-selection problem as much as a borrower problem."
Why a mortgage agreement in principle is not a guarantee
Getting a decision in principle (DIP), also known as an agreement in principle (AIP), can give buyers an indication of how much they might be able to borrow.
However, it is not a guarantee that a full mortgage application will be approved.
Matt Coulson, founder of Heron Financial, said: "The paradox makes sense once you look past the rules. Criteria have loosened on paper, but money has got dearer, so people still fail affordability, unable to service the loan at today’s rates.
"Looser rules don’t help if the payment is too high. In order, the three most common reasons for a no are affordability, then the credit file, often missed payments or too much unsecured and buy-now-pay-later debt, then income that doesn’t fit the lender’s boxes, like self-employed, bonus or contract pay.
"A decision in principle lulls people too. It’s a soft check on headline numbers, so a yes there and a no later is common and rising, once the full application examines the bank statements, credit file and valuation."
What should you do if your mortgage is declined?
Experts say the first step is to establish exactly why the lender turned down the application before trying elsewhere.
Babek Ismayil, founder and chief executive of OneDome, said: "A mortgage rejection doesn't always mean you can't afford the property. It can mean you've approached a lender whose criteria don't suit your circumstances.
"What many buyers don't realise is that lenders can assess the exact same income, debts, and spending habits very differently.
"Before making another application, ask your broker to obtain the specific reason for the decline and check your circumstances against alternative lenders' criteria, ideally using eligibility checks that don't affect your credit score."
Craig Fish, director at Lodestone Mortgages, warned against making several applications in quick succession.
He said: "If you are declined, the worst move is firing off applications to other lenders and hoping one sticks, because every hard search sits on your credit file and lenders notice the pattern. The decline itself isn't recorded, but the searches are. Stop, find out exactly why, and get whole of market advice before you go again, with a clear plan."
Stephen Perkins, managing director at Yellow Brick Mortgages, added: "A mortgage decline is often a lender saying 'this case doesn't fit us', not the market saying ‘you cannot get a mortgage’. Affordability, credit history and the way income is earned are common reasons, but lender appetite and internal scoring can make a huge difference, too."
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Jamie Alexander, mortgage director at Alexander Southwell Mortgages, said affordability was the biggest issue facing applicants.
He said: "Affordability is the biggest reason right now, followed by credit history and then the property itself. Rates have pushed payments up significantly and cases that sailed through two years ago are now borderline."
The experts' advice is clear: a rejection from one lender does not automatically mean you cannot get a mortgage.
Understanding the reason for the decision and checking which lenders may suit your circumstances could help you avoid another unsuccessful application.
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