Some small business owners and self-employed individuals looking for a residential mortgage are being penalised for taking government help during the pandemic, it has emerged.
This is contrary to what the government promised back in April when it offered support to businesses via a 12-month interest-free Bounce Back loan or to furlough staff. Some brokers – and lenders – admit it is included in mortgage credit scoring.
This is despite the fact many business owners and self-employed individuals may simply have taken the support because it was there. Thousands will have used the furloughing help for solely childcare reasons, for instance.
Will other lenders follow Virgin Money’s example?
Virgin Money – which owns the Clydesdale and Yorkshire Building Society – was the first to declare, weeks ago, that it wasn’t taking mortgage applications from business owners and/or self-employed staff who were receiving Covid-19 government support. At least, it wasn’t including furloughed income.
Nationwide, Lloyds and TSB said they weren’t ruling out individuals who had used government support, which includes the Coronavirus Business Interruption Loan Scheme. But they said it would be considered as part of their overall financial situation.
Mortgage broker Chris Sykes warned lenders were “setting the bar very high.” He added: “Some are scrutinising how people’s businesses are performing during the pandemic but not taking all circumstances into account, and we’ve seen some very harsh decisions.”
Mortgage holidays bad news for self-employed
Broker Nick Morrey of John Charcol, said those self-employed individuals who had taken a mortgage holiday might find their mortgage credit scores affected. This is also despite government assurances this wasn’t the case.
He said: “I understand they [lenders] don’t want to lend to people who won’t be able to pay it back, but they are treating the self-employed very differently to other clients.”
As well as their personal finances, many self-employed business people looking for a residential mortgage (or to re-mortgage) are being asked to show details of their company accounts too. In April many lenders were asking small business owners to provide personal guarantees when applying for an emergency loan. This practice has since been banned.
