Furlough and mortgage applications: Can I still buy or proceed with a property purchase if I have been furloughed?

More than 6.3 million employees in the UK are now on furlough leave with reduced salaries
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Anna White6 May 2020

Nearly a quarter of employees in Britain have been furloughed since the Government launched its coronavirus retention scheme on April 20.

Under the scheme, Chancellor Rishi Sunak said the Treasury would pay 80 per cent of furloughed workers' wages, up to £2,500 a month, so that employers facing difficulties can avoid redundancies and keep staff on the payroll.

The scheme was initially due to run until June 1, but it has now been extended until at least the end of June.

Yesterday, it was announced that the Chancellor has begun detailed planning to taper back furloughing, with options including cutting the 80 per cent wage subsidy to encourage people to look for new jobs.

With more than 6.3 million employees now on furlough leave with reduced salaries, how is this affecting mortgage applications?

If have been furloughed can I still get a mortgage?

If you apply for a mortgage while on furlough, lenders will only take into account the income that you have been furloughed on.

This will be a maximum of £2,500 per month as paid by the Government.

They will include the amount the employer is topping up, if that is confirmed by the company.

Some lenders are asking the employer to confirm whether they plan to rehire the employee but that, of course, is difficult to answer.

I had a mortgage in principle on a new property, had accepted an offer on my home and was then furloughed. What now?

If you have a mortgage in principle and had received an offer before being furloughed, then this is down to the lender.

By rights the mortgage in principle should be binding but some lenders are writing to borrowers to confirm that there has been no change of circumstances such as a pay cut or furloughing.

The application could be re-underwritten, reduced or withdrawn.

I haven't been furloughed. Will I still be able to get a mortgage at this time?

The lockdown shut the mortgage market momentarily.

On March 19 the Bank of England slashed interest rates from 0.25 per cent to 0.1 per cent, the lowest in its 325-year history.

International call centres were closed and a reduced workforce was inundated with borrowers asking for mortgage holidays or trying to shift to tracker loans. As a result banks pulled more than half of their products, shut the doors to new applications and stopped physical mortgage valuations.

The products that were cancelled tended to be high loan-to-value mortgages such as Help to Buy loans.

However, it is now possible to get an approval based on an automated valuation for mortgages under 60 per cent loan-to-value on a property priced below £500,000.

Lenders are now starting to relax this further. Higher loan-to-value mortgages are creeping back in and automated valuations are available on homes priced below £700,000.

Help to Buy is back

The Government-backed Help to Buy scheme is available on new homes valued below £600,000 in London. The buyer needs a five per cent deposit while the Government puts up a 40 per cent loan and the bank lends the remaining 55 per cent.

It is therefore a 95 per cent loan-to-value product and was withdrawn by many lenders when coronavirus hit.

However, lenders are starting to offer it once again. The lenders offering Help to Buy London products are:

  • Bank of Ireland
  • Halifax
  • Leeds Building Society
  • Leek United Building Society
  • Nationwide Building Society
  • NatWest
  • Newbury Building Society
  • Santander
  • TSB​