HSBC Rejected Your Mortgage Application? Here’s What to Do Next

Having your mortgage application declined by HSBC can feel like a big setback, particularly if you’ve selected HSBC as your chosen lender for a specific reason. But don’t stress – there are still a variety of options open to you.

Many applicants face a declined mortgage at one point or another, and it is important to know that a rejected mortgage application does not mean that you won’t be able to secure a different mortgage in the future.

The key to a mortgage application being declined is to understand the reason(s) behind: “Why was your HSBC mortgage declined?”

Was it due to affordability checks, credit history, income requirements, or even something that feels ‘outside the box’. In this article we take a complete look at the reasons why your HSBC mortgage application was rejected and exactly what you need to do next. Let’s jump in.

Why HSBC Rejected My Mortgage Application: The Reasons Explained

It is first important to note that a mortgage application rejected by HSBC would not happen without reason. All mortgage lenders follow a strict criteria in which all applicants must meet before they approve a loan.

As such, understanding the reasons behind your mortgage rejection can provide you with an insight into how you can improve your financial profile before applying for a new mortgage. The three most common reasons for a mortgage rejections include:

Issues with Credit History

Credit history will play an important role in any mortgage application, for lenders will look to assess your financial standing by evaluating your financial credit history. Specifically, HSBC will look at the following:

• Your overall credit score
• Any other credit agreements you already have in place
• Any missed repayments
• Any County Court Judgments (CCJs), debt, or bankruptcies recorded.

As a leading high-street lender, HSBC follows a strict credit score criteria, and so if you’re applying for a mortgage with a bad credit history, it is likely that this will be the reason for your mortgage refusal.

If your credit history did not pass the HSBC credit score check and is the reason for your rejection – don’t worry – there are plenty of ways to improve it.

You can start by checking your credit score with an independent reference agency. As of now, there are 3 main credit reference agencies in the UK, including:

• Experian
• Equifax
• TransUnion

This check is completely free and provides you with an insight into how a lender will view your application with the context of your financial history, credit score, and debts.

With this knowledge you can start making steps to improve your overall credit. This could be by managing any errors, consistently making payments on-time, or paying off any existing debts. Each correction will start to gradually boost your score, making your financial profile much more appealing to lenders when it comes time to apply for another mortgage.

Failing to Meet Affordability Criteria

In some instances, your credit score can be good, but you still might not meet the HSBC mortgage criteria for affordability.

It’s no secret – the primary concern for any lender is to ensure that any mortgage loan granted will be reliably paid. As such, lenders will complete affordability checks to ensure that you will be able to comfortably afford the monthly mortgage repayments, correlating to your total borrowing amount.

Each lender will have their own affordability criteria and methods of assessing an applicant’s financial standing, and HSBC have their own unique ‘HSBC lending criteria’. However, there are the ‘usual suspects’ – as we call them here at Boon Brokers – that most lenders will check, including:

• Income
• Expenses
• Debts
• Deposit size
• Other financial commitments
• Employment status

If a lender suspects that you may struggle to afford your mortgage repayments, your application will be rejected.

Due to the fact HSBC is amongst the leading high-street lenders in the UK, the HSBC affordability criteria tends to be very strict in comparison with other specialist lenders.

Should an affordability assessment be the reason for your mortgage refusal, there are methods of increasing your appealability to lenders. Making concerted efforts to minimise your expenses and maintaining a regular income with a healthy bank account balance, will help your overall financial standing and how lenders view your application.

If you’re worried about affordability and income blocking your path to a mortgage deal, then work with a trusted broker like Boon Brokers. As a whole-of-market broker, we can find and compare mortgage products from leading lenders – like HSBC – with specialist lenders, helping to find you a mortgage offer that matches your financial circumstance.

Insufficient Income to Support Mortgage

The third most common reason for a declined mortgage is down to insufficient income.

Closely linked with affordability checks, lenders will assess and evaluate your total income and stability of your income, in order to determine whether or not you would be able to afford the additional mortgage loan repayments.

As such, it is important that you pay close attention to your chosen lenders affordability calculations and how they calculate your income. For example, if you are likely to see fluctuating incomes or additional benefits such as commission or bonuses, it is important that you understand if your lender will include these in your overall calculations.

Depending on your profession and income structure, the income calculation checks performed by your chosen lender could be the reason for your declined mortgage.

To demonstrate this, let’s take a snapshot of income structures for investment bankers. With a variety of different income channels, including:

• base salaries
• bonuses
• Commission
• restricted stock units (RSUs)

It would be massively advantageous for an investment banker to ensure that all of these incomes are incorporated for an optimal mortgage deal.

If your occupation follows a similar diverse income structure, then this may be the reason why your initial mortgage application declined.

Self-Employed Proof of Income Requirements

For those who are self-employed, it is important to note that your chosen lender may require more proof of income to calculate your total income.

While most lenders – including HSBC – will ask for two years of Tax Calculations and Tax Overview documents, some lenders may request more. This is because calculating income for self employed business can be difficult, and it is not uncommon for businesses to have highs and lows when it comes to gross income figures.

As such, lenders will typically take an average of your income from the past two to three years to estimate your annual income. Should you be unable to provide this evidence, your mortgage application will be refused.

What Led to HSBC Declining My Mortgage After the Agreement in Principle?

Arguably one of the most frustrating experiences in a mortgage journey is to have a mortgage in principle declined, after receiving confirmation of the initial agreement.

Unfortunately, this is a common reality that many have to face, and often happens during the final assessment carried out by your chosen lender.

It is important to note that an MIP – labelled a Decision in Principle by HSBC – is an estimated indicator of how much the lender will be likely to lend you for your mortgage. It is not a binding agreement, and further assessments carried out by your chosen lender can bring to light something that will directly affect the outcome of your mortgage application.

Focusing on HSBC’s mortgage in principle criteria, this leads us to the question “What did HSBC find during their final assessment to refuse my mortgage in principle?”

The most common reasons why a Mortgage in Principle (MIP) will be declined by HSBC include:

• Did not pass the final credit check
• There has been a marked change in your income
• There is Incorrect information on your application
• The HSBC criteria has changed
• There is suspicion of fraud

In the scenario that your mortgage was declined at this stage, it is best practice to review the feedback given by HSBC. Furthermore, you should ensure that all your documentation and financial information are accurate before applying again.

If you have recently received a mortgage refusal after an MIP, working with a broker can help you pin-point the reasons behind your refusal and help set you on course for a successful mortgage reapplication.

If you fall outside of the ‘typical’ borrower, either with a history of bad credit, income fluctuations, or even a lack of financial history because of age or occupation, HSBC’s rigorous assessments are likely to reject your mortgage application.

HSBC will still offer mortgage products to self-employed workers, however, you will be required to provide additional documents. These will typically include your last 2 years’ worth of tax year overviews (dated within the last 18 months), and your last 2 year’s worth of tax calculations from the HMRC or SA302 forms (dated within the last 18 months).

Importantly, the HSBC mortgage criteria is set to ensure that you would be able to manage any remortgage payments comfortably. This means that you do not end up in a position whereby you are struggling financially or being forced to live beyond your means.

How to Move Forward After HSBC Rejects Your Mortgage Application?

Unfortunately, you’ve had your HSBC mortgage declined. So, what’s next? Your first question will likely be “what should I do if my mortgage is rejected?” Well, first things first – don’t panic.

As we’ve touched on before, just because HSBC has rejected your mortgage, it is likely that you just need to address a few issues in your application.

There three very important steps to take after your mortgage application is rejected, starting with:

1)   Avoid Reapplying for a Mortgage Too Soon

Do not immediately reapply for another mortgage!

Although it may be tempting – and possibly fuelled by frustration – to jump into another mortgage application, it could result in damaging your overall credit score.

Each mortgage application requires a lender to complete a hard credit check, and multiple applications within a short period of time will make you look desperate for credit. In turn, this will make you increasingly less attractive to lenders, and may directly affect your chances of success of securing a mortgage with your next application.

The best first step is to wait. Take time to assess why your mortgage application was rejected, and fix any issues before applying for a new mortgage.

2)   Understand Why HSBC Declined Your Application

Without a doubt, the best way to move forward is to completely understand the reasons behind your mortgage application being rejected. HSBC will never arbitrarily refuse an application, and there will likely be a specific explanation as to why your mortgage application was refused.

Speak to HSBC and request a report on why your application was refused. This could highlight any issues found, from affordability checks, credit score concerns, to a lack of evidence and documentation. Knowing the exact reasons can provide you with the insight on what you need to fix before your next mortgage application.

3)   Take Time to Reflect and Improve

Now you know the reason(s), why your mortgage application was rejected, it’s time to improve.

If your credit score is too low, make efforts to clear any outstanding debts and start making timely payments consistently.

Should your affordability be an issue, consider increasing your deposit or reducing existing financial commitments. In some cases, it may be best to wait another 6 months to a year to help increase your overall deposit size and place you in a better financial standing.

If you find that your income amount or structure did not fit the HSBC lending criteria, look to alternative lenders that accept a wider range of income sources.

It is also worth noting at this juncture, HSBC are not the only lenders available to you. In fact, there are around a hundred mortgage lenders in the UK today – we know because we work with those lenders – who could potentially offer you the mortgage deal that fits your needs.

Working with a trusted whole-of-market broker – like Boon Brokers – can help you establish the reasons behind your mortgage application, as well as finding you a new lender that fits your mortgage requirements.

Consult With a Mortgage Broker

Having a HSBC mortgage declined isn’t the end of your mortgage journey – it might just mean a fresh start!

By understanding the reasons behind the rejection and taking steps to improve your financial position, you can increase your chances of securing a mortgage in the future.

If you’ve had your HSBC mortgage declined, working with a trusted mortgage broker can make all the difference.

Here at Boon Brokers, we have access to a wide range of lenders and can help match you with one that is more suited to your financial situation.

Contact Boon Brokers today – our expert mortgage advisors can offer guidance on how you can improve your application, and find a lender that matches your needs.