During the coronavirus crisis, the chancellor, Rishi Sunak, offered employers the ability to furlough employees rather than make them redundant.
The furlough scheme will run for a minimum of three months from the 1 March 2020 and allows employers to claim back 80% of an employee’s wage from the public purse. Employers can choose to pay the additional 20% on top but many employers are not in a position to do so. The furlough scheme does not take into account any bonuses or commission the employee may earn, this leaves tens of thousands of people on 80% of their basic salary.
What are the banks and building societies doing?
With the UK in lockdown, many banks and building societies are tightening their rules on lending. Nationwide will now only lend to those who have a 25% deposit. Part of the reason for this is that they are unable to do physical valuations on properties. They must therefore reduce the risk that they are loaning money on a bad investment.
Other lenders are also changing their criteria and assessing the customer’s ability to pay the mortgage based on their furloughed earnings.
What can I do to increase my chances of getting a mortgage?
While this is obviously a blow to home buyers, it is a good time to set a budget. Reduce your outgoings as much as you can so that you meet the affordability requirements even if on 80% of your basic wage.
As it is likely that house prices will drop, a 25% house deposit will be less than it would have been before the current crisis.
There is no saying when life will return to normal, so start thinking in the long term, you may just get your dream home yet.