Mortgages

64% believe lenders do not consider furlough status in mortgage applications

Rozi Jones
|
30th July 2021
declined mortgage application adviser business barrier
"Our survey clearly shows that many people have underestimated the impact of being furloughed or accessing self-employed Covid grants on their ability to get a mortgage."

64% of Britons believe that lenders do not consider whether an applicant has received support from the furlough scheme in mortgage applications, according to a new poll by NerdWallet.

42% also believe that being self-employed is not usually a factor considered by lenders in mortgage applications.

The research comes amid reports of Britain’s largest high street banks refusing mortgage applications to furloughed workers and self-employed people who have received government support during the pandemic. Brokers have also argued that some banks see people who have received Covid-related grants as higher risk.

With around 2.4 million people still on furlough in the UK, the new poll also found that 1 in 20 felt they were currently ‘priced out’ of the property ladder because they are on furlough. 9% also said they felt priced out of buying property because they are self-employed.

Compared to all age groups in the study, young people (18-34) are the most likely (66%) to think that mortgage lenders would not consider whether an applicant received support from the furlough scheme. Men were also 9% more likely than women to think this.

The research also highlights that only 22% of working age adults (18 to 54 years old) and 15% of young adults (18 to 25 years old) knew that the government-backed mortgage guarantee scheme could apply to them.

78% of working age adults also said that they do not have a good grasp of the support available to help them buy property. 76% of working age adults feel they lack good knowledge about how to secure a decent mortgage. 80% lacked confidence that they could identify poor mortgage advice, with 31% also stating that they believe there is a lot of misinformation about mortgages online.

Richard Eagling, senior mortgage expert at NerdWallet, commented: “Our survey clearly shows that many people have underestimated the impact of being furloughed or accessing self-employed Covid grants on their ability to get a mortgage. A lender will always determine the risk level that a mortgage applicant presents and whether they can afford the repayments, and it seems that many lenders are excluding furloughed income when assessing affordability.

“Likewise, some high street banks are declining mortgage applications from those who took the government’s self-employment income support scheme (SEISS) grant, or are asking them for larger deposits. This is another sting in the tail for those that have been financially affected by Covid and presents a challenge to their dreams of homeownership.”

 

Related articles
More from Mortgages
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.