If you apply for a mortgage while on furlough, lenders will inly take into account the income that you’ve been furloughed on.
Nearly a quarter of all employees in Sheffield have been furloughed since the Coronavirus retention scheme on April 20th 2020 created by the UK Government. Under the scheme, Chancellor Rishi Sunak said the treasury would pay 80% of furloughed workers’ wages, up to £2,500 a month, so that employers can reduce redundancies and keep staff on the payroll.
If you apply for a mortgage while on furlough, lenders will only take into account the income that you’ve been furloughed on. So, for example, this will be a maximum of £2,500 per month paid by the government.
They will include the amount the employer is topping up if that is confirmed by the company. However, some lenders are asking the employer to confirm whether they plan to rehire some employees but that, of course, is difficult to answer.
During Lockdown, the mortgage market was shut momentarily. The Bank of England slashed interest rates from 0.25% to 0.1%, the lowest in its 325-year history. With borrowers asking for Mortgage holidays to try to shift their tracker loans. As a result, banks pulled more than half of their products, shut the doors to new applications, and stopped physical 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% loan-to-value on a property priced below £500,000.