According to a new study by personal finance platform NerdWallet, 42 per cent of people believe that being self-employed would not have an impact on their eligibility for a mortgage. The study, of 2,000 adults, also found that 64 per cent did not think that being placed on furlough would be a factor in mortgage applications.
The study has raised concerns that people are underestimating the impact that employment status can have on their borrowing ability in the wake of the COVID-19 pandemic. While numerous lenders have relaxed their lending criteria in recent months, many have still indicated that being on furlough or receiving Self-Employment Income Support Scheme (SEISS) grants could impact a person’s ability to borrow.
Mortgage experts have warned that a lack of awareness regarding lending criteria and differences in eligibility criteria between high street lenders could create confusion and potentially leave hopeful borrowers in a weakened position, with a limited selection of possible lenders to turn to.
Richard Eagling, Senior Mortgages Expert at NerdWallet, said of the results: “A lender will always determine the risk level that a mortgage applicant presents and whether they can afford the repayments, and it seems that many lenders are excluding furloughed income when assessing affordability.”
“Likewise, some high street banks are declining mortgage applications from those who took the government’s SEISS grant or are asking them for larger deposits. This is another sting in the tail for those that have been financially affected by COVID and presents a challenge to their dreams of homeownership.”
