The Coronavirus pandemic has affected us in a lot of different ways. From various adaptations, this year has seen many people being placed on furlough, the Coronavirus Job Retention Scheme. But with the current furlough scheme still in place until March, how will this affect buying a property?
Back in March, when the first lockdown took place, the mortgage market drew to a halt. As a result, this impacted the option for lending or getting a mortgage, even the Bank of England’s rates were the lowest in their history. There even was an 87% fall in mortgage approvals from February to May 2020 due to COVID-19.
As the UK market has now reopened, lenders confidence is beginning to grow as we see the return of some mortgage, rates and products – but if you have been furloughed can you still apply?
Ultimately those who are still on furlough are facing limited mortgage options. This is because when applying for a mortgage, lenders are only taking into account the income people have been furloughed on.
Since the start of the pandemic, around 9 million people have been placed on furlough. People’s incomes have been reduced by 80% of their current salaries; with the government paying a maximum of £2,500 per month. So, lenders might be sceptical about giving you the go-ahead with your mortgage application.
If you are still on furlough, it may be possible that you can still apply for a mortgage. But your current income and what you can afford will impact the rate of the interest and the size of your mortgage that you will be able to get.
If you have already had a mortgage accepted on a home before you were furloughed it is now up to the lender to decide whether this will still go ahead; meaning in principle the application could be reduced or withdrawn.
The pool of lenders to choose from is also limited. With the current economy and Coronavirus impacting job security, your ability to repay your mortgage is in question by lenders. For some lenders, they will be able to take other factors into account, but others this will be too much of a risk.
Some lenders are asking for confirmation about a person’s job security in the form of a letter, but some employers are unable to provide this as it is uncertain during the current pandemic.
Can my partner’s income help get a mortgage?
Some lenders are considering applicants who have a partner who hasn’t been furloughed. If you are deciding to get a joint mortgage with someone, lenders will assess both incomes to create a maximum amount they will be able to offer you. Those people who can rely on a partner’s income face a higher chance of securing a mortgage.
What if I have debt and I am on furlough – Can I still get a mortgage?
If your debt is too high in relation to your income, it is more than likely the lender will reject your application. But if the debt is deemed manageable you have a higher chance of approval.
Essential items when applying for a mortgage application during furlough:
- ID – either a driving licence or a passport
- Bank statements – in some instance’s lenders require bank statements from anything between three months to two years
- A good credit score
Although it could be possible to get a mortgage while on furlough, it might be worth considering relaxing plans on gaining a mortgage until lenders relax their restrictions further.