High risk clients: Furloughed workers and self-employed with Covid grants refused mortgages
Furloughed workers and self-employed people who have received government grants during the pandemic have been refused mortgages by some of the UK’s major banks.
This comes as some brokers argued that banks see people who have received Covid-related grants as high risk.
Two of the UK’s biggest high street banks, NatWest and the Royal Bank of Scotland, are reportedly refusing mortgage applications from people who took the government’s self-employment income support scheme (SEISS) grant.
With lenders taking the last two years of accounts on board, this may mean the Covid pandemic will still have an impact on mortgage applications from self-employed workers until 2023.
This has also led to some banking giants to ask for steeper deposits with Metro Bank asking for 20 percent or more if self-employed people take out an SEISS grant.
Furlough
Mortgage applications from furloughed workers will not be accepted by banks including Lloyds and Yorkshire Building Society, meaning furloughed income will not be considered as part of their affordability assessment.
“We are calling on lenders to look at how businesses were performing before the pandemic, as a more likely guide for how they will perform afterwards,” said Andrew Montlake, a broker at Coreco.
A Finanial Conduct Authority (FCA) spokesperson said the SEISS grant or support of this kind “should not, of themselves, prevent people from being able to access credit.”
“Lenders are required to treat customers fairly when they apply for a mortgage,” the spokesperson added.
Nearly 60 percent of self-employed borrowers said they felt penalised by lenders because they worked for themselves when applying for a mortgage, according to a survey carried out by the Association of Independent Professionals and the Self-employed (IPSE).
UK Finance said in order to make mortgages more affordable in the future, lenders must carry out a thorough income check.