Published On: Mon, Jul 27th, 2020

Mortgage UK: How furloughed workers could struggle to secure a mortgage | Personal Finance | Finance

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Mortgage availability is slowly beginning to recover after the property market took a hit due to the COVID-19 crisis. As lockdown set in, the market was effectively frozen, with Britons urged to stay at home, and businesses required to shutter. However, as lockdown eases and the market begins to reopen, many were optimistic there would be a surge in interest.

While TSB usually offers a loan of up to 4.5 times a person’s wage, dependent on their circumstances, a salary of £1 means those on furlough would only be able to borrow £4.50.

The lender has said if a person is not getting their salary topped up by their employer, they have chosen not to lend. 

TSB’s website reads: “As part of our responsible approach in helping customers to borrow well, we no longer accept furloughed income where the customer’s salary isn’t being topped up by their employer.

“For joint applications which remain affordable on the other customer’s income, employment details should be captured, and income keyed as £1 for the furloughed customer.”

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Those on furlough will have to provide proof their employer is committed to keeping them in a job, which can be done through a letter dated within four weeks of the application.

The change is likely to make it more difficult for those who are on furlough to secure a deal.

This means some may have to place their homeownership goals on ice for the time being.

Various lenders have offered specific guidance to those who are on furlough.

Nationwide and Barclays have said they will accept 80 percent of a person’s income, but in cases where an employer is topping up their salary, they will need to have proof of this.

HSBC has said it will also base an assessment for securing a mortgage on a person’s furloughed income.

However, organisations such as Virgin Money, Loughborough Building Society and Bluestone Mortgages have taken a different approach.

They have said they will not be lending to those who are on furlough at this time. 

The furlough scheme was first announced by the Chancellor Rishi Sunak back in March, to provide financial assistance to people whose working circumstances had changed as a result of lockdown.

Figures have revealed nine million people up and down the country have been affected by furlough. 

It has had financial implications for many households, but in terms of mortgages, it has been particularly significant.

Mortgage broker The Mortgage Hut provided insight into furloughed workers obtaining a loan, stating: “Applying for a mortgage while on furlough may be possible in some instances, though your affordability and income will affect the size of your mortgage and the rate of interest you may be charged.

“Lenders are likely to only take into account the income that you have been furloughed on, and because the furlough scheme pays out 80 percent of your salary, lenders might be hesitant about approving your application.”

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