Heading Back to Work - How Will Furlough Affect Mortgage Applications

News at Musker McIntyre | 03/11/2021

Heading Back to Work – How Will Furlough Affect Mortgage Applications
Those who had been planning to move house but whose plans were put on hold during lockdown, may now be ready to get going again.

If you had been furloughed in 2020 you may be wondering how you stand in terms of getting a mortgage today. It’s a legitimate concern considering that at one point during lockdown a number of well-known lenders refused
to take applications from people who were furloughed.

Thankfully, that’s no longer the case – especially since the government scheme is at an end and employers are now having to pay staff their entire wage entitlement.

Detailed breakdown of local furloughed workers

It also means more than 30,000 individuals in Norfolk and 12,000 in Norwich, will once again have the ability to apply for a mortgage. Those are the numbers of workers who were
furloughed during lockdown. 

Official government figures for the Coronavirus Retention Scheme show that at the end of March 2021 there were 5,700 workers furloughed in South West Norfolk.
In the North West, the figure was 5,700 and in the North, 5,300. In South Norfolk 5,700 people were on furlough and 5,400 in Mid Norfolk.
The figures were pretty similar for Norwich too, with 5,900 in the North and 6,100 employees in the South.

Why being furloughed won’t matter when it comes to a mortgage application is because there are many other indicators of financial ability that lenders can take into account.
Basically, a lender will give a mortgage to an individual or couple if he or she believes the recipient will be able to afford to repay it.

The earlier financial crash of 2007 occurred because lenders – particularly in America - were giving out mortgages to individuals and couples who had no hope of repaying it.
Government financial bodies aren’t about to let that happen again and indeed restrictions have been put in place since the recession.

So, being on furlough will be considered by the lender, and it may make him or her hesitate, but on the whole if you have your job back, at the same salary and you tick the other boxes,
then there is no reason why you shouldn’t be able to get a mortgage approved. The lender may ask for further information, however. This could include a letter from your employer
indicating when you will return to work and on what terms. 

You may find that being on furlough has affected your credit status (i.e. it could have dropped). Most mortgages are taken out for 25 years and, if you’d applied pre-COVID, you’d
have been at least a year younger. Another drawback is that the cost of property has certainly risen since the property market reopened earlier this year.

If you’re not sure about whether or not you will get a mortgage, or wondering if it will be possible to re-mortgage, then do feel free to ring and ask our advice.
Tel: 01603 627777 - Ross Walker 

How to make getting a mortgage more likely
Meanwhile, there are ways to improve your prospects of getting a mortgage.

● Make a serious attempt at paying off any outstanding debts, such as credit cards,
store cards etc. That way your outgoings can be substantially reduced and your
mortgage payments look much more affordable to a potential lender.

● If you are self-employed then look for a mortgage lender who is sympathetic towards
individuals who work for themselves. You’ll also need three years of tax returns to
show your typical salary.

● It should be possible to get a new mortgage with your own bank if you’ve been
furloughed. Provided you aren’t asking for more money and your mortgage
repayments are up to date, then your lender won’t have any reason to check whether
or not you were furloughed during lockdown.

● If you have been on furlough then it may be better to wait a bit longer before applying
for your mortgage. That way your financial situation will have time to settle, and you’ll
know how certain your job is too.

And certainly, since the end of the first lockdown when estate agencies were able to carry out viewings again (albeit virtually), mortgages have been approved.
The Stamp Duty Holiday – which came to an end at the end of September – helped create a buying frenzy and, by extension, a huge number of mortgages being issued.

In fact, according to figures from the Financial Conduct Authority (FCA) the outstanding value of all residential mortgages for the year ending September 2021 was £1,584.1 billion.
The number of ‘holiday let’ mortgages (i.e. for second homes) has doubled within the past year.
In August those looking for such a mortgage could choose from 186 possible deals – compared to just 74 a year earlier.

Rachel Springall @MoneyfactsGrp said: “As the demand for staycations remains evident, it
would not be too surprising to see more growth in this market in the months to come.”