Paying rent on time could finally start helping renters get a mortgage: ‘A very positive step’

Renters could soon be able to prove they can afford a mortgage by keeping up with their rental payments in a change to make it easier for first-time buyers on the housing ladder.

Last week, Rachel Reeves announced a swathe of reforms to financial regulation designed to make it easier for people to buy a home in a bid to drive growth. The reforms will see mortgages offered at more than 4.5 times a buyer’s income, which Labour claims will create up to 36,000 additional mortgages in its first year in operation.

Mortgages will also be made available to first-time buyers on a lower salary as part of Nationwide’s ‘Helping Hand’ mortgage scheme. Eligible salaries will now be considered from £30,000, down from £35,000, and at £50,000 rather than £55,000.

The chancellor said she hoped the reforms would have an “instant impact” for consumers.

But she also signalled plans to carry out a review of Financial Conduct Authority lending rules that could allow a prospective buyers’ record of paying rent on time to show they can afford mortgage repayments. 

This promises to be a significant move that the Big Issue has been calling for in recent years.

Big Issue founder Lord John Bird launched the Creditworthiness Assessment Bill back in 2018 which aimed to make it a requirement for credit providers to take into account rental and council tax payment history.

Lord Bird argued at the time that there was “an urgent need to democratise access to affordable credit”.

Like many private members’ bills, it failed to make it into law.

But work to broaden ways to boost credit scores has been ongoing since then.

Big Issue Invest, Big Issue’s social investment arm, also teamed up with Experian to work on the Rental Exchange, working with registered social housing providers to incorporate tenant’s rent payment history into their credit file to help them build up their credit score.

The government’s latest move could be a big step for renters looking to boost their credit score to secure a mortgage.

English Housing Survey figures, released last week, showed 71% of private renters across England in the lowest two income quintiles spent more than 30% of their gross household income on rent. That rose to 96% of renters in London.

But fewer renters are in arrears, according to the survey, with 95% of private rented households not in arrears in 2023-24, compared to 92% a year earlier. More than half of private renters had savings too, compared to just a third a decade earlier.

If tenants are able to prove that they can keep up with their biggest outlay in rent to boost their credit score, it could improve their chances of home ownership.

John Webb, consumer expert at Experian, said Reeves’ announcement is a “positive milestone”.

He said: “It means lenders can make a more accurate assessment of affordability. For people looking to get on the housing ladder, it’s a very positive step, especially if you’re making large rental payments each month.”

Money to pay rent is not the only type of payment that can be taken into account when assessing credit scores.

Read more:

• Renters’ Rights Bill clears House of Lords bringing to end peers’ ‘tenant and landlord battle’
• Tory MP Robert Jenrick says mass migration to blame for rising rents. Here’s what he’s not telling you
• Good news for renters – the rental boom is finally over, says Zoopla

Experian’s Experian Boost initiative also allows customers to use council tax and digital subscriptions to prove they can keep up with payments when applying for a mortgage.

That even means Netflix payments can help the quest to get on the housing ladder.

“If you’re thinking about getting credit, especially a mortgage, then being prepared is key,” said Webb.

“Start checking your free Experian credit report and score well in advance. You should make sure you’re making all your credit payments on time and keep your overall debt low. If you’re close to limits on credit cards – bringing these balances down before you apply can be helpful.

“If you’re paying for digital subscriptions like Netflix or Prime, or even paying your council tax regularly, you could boost your Experian credit score for free too. The free Experian Boost service could improve your score by up to 101 points, meaning you may unlock options for credit.”

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