Most High Street Banks Unwilling to Grant Mortgages to Furloughed Workers

Individuals who received government grants during the pandemic due to a loss of earnings are being unfairly scrutinised and automatically rejected by some of the biggest banks on the High Street.

A report published this week by the BBC suggests that several major lenders are refusing to accept mortgage applications from people on furlough or those who received financial aid from the government during the COVID-19 crisis.

Brokers have reported that workers within the entertainment, hospitality, and travel sectors are among the worst affected, being refused help outright irrespective of their current financial position.

Such applicants are being treated as ‘high-risk’ cases by major lenders, purely on the basis of having received financial support they were legally entitled to.

“I almost feel like I am being treated like a bankrupt, in some way, that I am being penalised for something that wasn’t my fault,” hospitality worker Lisa Harding told the BBC.

A 49-year-old first-time buyer with a 10% down payment saved, Ms Harding said she cannot get her mortgage application through the door due to the fact that she was furloughed from her hospitality job during the pandemic.

Despite having now returned to stable full-time work, she cannot get a mortgage on the High Street.

“I feel unfairly penalised. Furlough has been brilliant in that it has protected my job. But I didn’t expect to come out of the other side: with a deposit, no debt, a perfect credit rating, all the things that should make me an ideal first-time buyer, only to find out that banks just will not lend to me at all,” she said.

Self-employed individuals also struggle

The BBC’s investigation found that the Royal Bank of Scotland and NatWest, two of the biggest lenders in the UK, have been automatically declining mortgage applications from individuals who used the government’s self-employment income support scheme (SEISS) during the pandemic.

“As it stands, we aren’t accepting applications from customers who have applied for a SEISS grant on or after July 14, 2020,” a spokesperson told the BBC.

“As a responsible lender, this is part of the bank’s affordability criteria.”

Applications are being denied on the basis of SEISS grants alone, without taking the applicant’s wider financial circumstances into account.

The Yorkshire Building Society and TSB said such applications would be considered, though the applicant would need to present extensive evidence of the recovery and financial performance of their business.

Many banks are imposing much higher deposit requirements for self-employed workers; at Santander, the minimum deposit requirement for self-employed individuals applying for a mortgage is now 25%.

The BBC reported that most of the lenders it reached out to, including Virgin Money, TSB, the Yorkshire Building Society, and Lloyds, said that they were not currently accepting mortgage applications from individuals on furlough.