At the end of July, approximately 9.5 million jobs from 1.2 million different employers were furloughed in the UK as part of the government’s Job Retention Scheme.
If you’re currently furloughed, you might be worried about your chances of getting a mortgage, particularly if you’re in the process of buying a home or switching your mortgage.
You may also have seen headlines in recent weeks about lenders such as Nationwide and TSB reserving the right to exclude the wages of furloughed workers when deciding how much you can borrow.
The good news is that many lenders continue to accept applications from furloughed workers. Read on to find out what you need to know.
Lots of lenders will consider your application, even if you’re furloughed
Last month, Nationwide, Metro Bank and TSB became the latest high-profile lenders to announce that they would not automatically take the income of furloughed applicants into consideration when underwriting a mortgage.
Other reports have suggested that people in particularly hard-hit industries such as travel or hospitality are seeing their applications refused.
However, there are plenty of lenders out there who will consider your income if you’re on the Job Retention Scheme.
Typically, a lender will assess affordability based on 80% of your normal income – i.e. the amount you are currently earning through the furlough scheme.
So, if your normal salary is £30,000 and you are currently receiving £24,000 from the scheme, lenders will use £24,000 as your income when assessing the borrowing for your new mortgage.
In addition to this, some lenders, including Barclays and HSBC have confirmed that they will take 100% of your income into consideration if your employer is ‘topping up’ your salary. You will have to prove that your employer is paying this additional amount.
So, using the example above, if you are currently furloughed but your employer is still paying you your full £30,000 salary (they are topping up the funding from the furlough scheme), there are lenders out there that will use your £30,000 income when assessing the borrowing.
If you have a planned ‘return to work’ date, then it may also be possible to obtain a mortgage based on your full salary.
For example, HSBC is still accepting applications from workers on furlough although you will need to provide a letter from your employer confirming your return to work income and return to work date.
An HSBC UK spokesperson said: “We continue to be open for business and support the housing market, including lending up to 90% loan to value and providing new lending to customers returning to work from the government’s furlough scheme.
“In order to ensure our application processing is as timely as possible while continuing to lend responsibly, for customers on furlough we are asking for a letter from their employer providing details of return to work date and salary as part of the application process.”
Get in touch
If you are on the furlough scheme, or you have recently returned to work after being furloughed, we can help you. Get in touch to find out how – email [email protected] or call 0131 339 2281.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.