REVEALED: mortgage applications by furloughed workers hit hard

Mortgage applicants on furlough are facing difficulties, with the extent of the impact only beginning to emerge

(Image credit: Getty)

The UK mortgage market has changed dramatically since the Covid-19 lockdown measures were introduced in March, with the full impact on applicants only just beginning to emerge.

Fresh data from online mortgage broker Trussle shows that both mortgage enquiries and mortgage applications went down significantly in April, by 37 and 35 per cent year-on-year respectively. The overall decline in mortgage applications in March to April is even more dramatic – 53 per cent lower than last year.

But what challenges are those who are still submitting applications facing? The most obvious obstacle now facing first-time buyers in particular is the suspension of high loan-to-value mortgages, which has suddenly raised the amount lenders require as a deposit to 15 per cent. 

However, wealthier mortgage applicants are also facing difficulties when applying for a mortgage, even if they are able to stump up the higher deposit amounts. The government furlough scheme has temporarily reduced over 7.5 million people's incomes to 80 per cent of a full salary – but the government scheme only covers salaries of up to £2,500 per month. This has left higher earners unable to qualify for more expensive properties such as family homes. 

As Trussle explains, being on furlough in itself doesn't necessarily bar an applicant from getting approved for a mortgage, with many lenders accepting applications that come with an employer's confirmation that the applicant will return to work. However, lenders will only consider furloughed salaries at the point of application, which will affect how much an applicant can borrow. Miles Robinson, Head of Mortgages at Trussle, comments:

'As the coronavirus crisis continues to impact people’s livelihoods, those who have been furloughed are naturally likely to be concerned about their mortgage applications.

'During these difficult times, many lenders will only consider 80% of a furloughed customer’s income in affordability calculations, provided that the applicant has confirmation that they’ll be going back to work. As there’s a monthly cap of 80% of salary paid up to £2,500 for furloughed workers, people earning more than this will be impacted more significantly. Many lenders are also hesitant to consider overtime and bonuses at this point in time as it is certainly not guaranteed income.

'While other lenders won’t accept furloughed customers at all, we’ve seen flexibility from those who are accepting customers on furlough and we’ve helped a number of customers in this position to secure mortgages. The criteria has been changing frequently during these times, so anyone who has been furloughed should seek professional mortgage advice.'

Whether or not you've been furloughed, if you're looking for a home, there's no harm in seeking the advice of a broker. We've partnered up with Habito – use their online mortgage comparison tool below to see how much you could borrow, and speak to one of their expert advisors for free for more advice.