The £4.50 mortgage: Fears furloughed workers will be unable to buy a new home after Britain’s fifth biggest bank TSB lists their salary as just £1
- Lenders fear furloughed workers will not have a job to return to after the scheme
- TSB will only offer mortgages to furloughed workers if their partner is earning
- Some smaller banks are refusing to offer a furloughed worker a mortgage at all
Furloughed workers may be unable to buy a new home as Britain’s fifth biggest bank could reduce the amount they are allowed to borrow to £4.50.
TSB has announced it lists furloughed workers’ income as £1 in its system due to fears they will not have jobs to return to at the end of the coronavirus crisis.
The bank usually offers a typical loan of up to 4.5 times an applicant’s salary so furloughed workers may only be entitled to a single-digit mortgage.
And some smaller banks and building societies are refusing to offer furloughed workers a mortgage at all.
Furloughed workers may be unable to buy a new home as Britain’s fifth biggest bank TSB could reduce the amount they are allowed to borrow to £4.50
Nationwide and Metro Bank have joined TSB in reserving the right to refuse to take furloughed income into account when calculating mortgages.
Workers on furlough in the hospitality or travel industries may be particularly shunned by lenders.
Nicholas Morrey of John Charcol, a mortgage broker told The Times lenders are less likely to offer loans to people working for airline companies or cruise ships.
He said: ‘It sounds really harsh, but it also comes under the category of ‘irresponsible lending’ if they lend to someone who might not have a job in a few months’ time.’
Banks are concerned some staff may not return to work given the furlough scheme ends in October and some firms have already begun job cuts.
Some smaller banks and building societies are refusing to offer furloughed workers a mortgage at all
Virgin Money, Loughborough Building Society and Bluestone Mortgages are some of the lenders refusing to offer mortgages.
Others have introduced measures making it harder for furloughed workers to borrow.
TSB will only lend to a furloughed worker if they are applying for a joint mortgage and their partner in full-time work.
Mark Harris of SPF Private Clients, a mortgage broker, said: ‘Some incomes will, in the short term at least, be affected.
‘Lenders are exercising caution and ensuring we don’t see a return to irresponsible lending seen before the last financial crisis.’
Last month, a survey of more than 2,000 homeowners and renters showed one in five had had to forsake their plans to buy a property as a result of the coronavirus crisis.
A third thought being on furlough would have a significant impact on their mortgage approval rating and make it very difficult to secure a loan.
David McGrail, compliance director at First Mortgage, told FT Adviser: ‘Due to the pandemic, the financial situation many now find themselves in will be different to when they applied for their mortgage.
‘This means that the maximum amount they can borrow for a mortgage is likely to be reduced in line with the salary they are now receiving.’
Nationwide will start lending to home buyers with a 10 per cent deposit again after the stamp duty cut earlier this month gave the housing market a boost
Nationwide announced it will start lending to non-furloughed home buyers with a 10 per cent deposit again after the stamp duty cut gave the housing market a boost earlier this month.
Britain’s biggest building society said it will offer up to 90 per cent loan-to-value deals, having upped the minimum deposit to 15 per cent in June.
But the giant reversed the devision after he Chancellor’s stamp duty holiday of up to £500,000 until 31 March 2021 gave the property market a shot in the arm.
Rishi Sunak announced that all buyers would see a zero rate of stamp duty up to £500,000 at the start of the month.