We have been rejected for a mortgage because of changes to banks’ lending policies when someone has claimed any amount of government furlough money. My partner was paid £590 in furlough over two months before he was able to resume supporting himself. As director of a limited company his salary is only a small part of his income. However, despite company accounts showing his total income, the lender has told us they will calculate his earnings based on four times the furlough income only. It looks like we will not be able to buy our first home.
The pandemic has created especially tough conditions for the self-employed, and lenders have become much more cautious in how they assess credit worthiness. Many are scrutinising earnings from the past three months, as well as annual accounts to judge whether Covid has squeezed income. According to Valentine Mulholland, credit policy specialist at the Money and Pensions Service, each lender is taking its own approach to risk and some are more welcoming to self-employed applicants than others, so it’s worth finding a mortgage broker who can help you navigate the options.