Refused mortgage for self-employed who took Covid grants


Lisa Harding at her house

Fur worker Lisa Harding of Coningsby, Lincolnshire, says she is “being unjustly punished.”

Some of Britain’s largest banks are refusing to issue mortgages to self-employed people who received government subsidies during the pandemic.

Mortgage brokers say those who work in sectors such as entertainment, hospitality and travel will be the hardest hit.

Many lenders that the BBC spoke about do not accept mortgage applications from people on vacation.

Brokers said banks often view people who have received coronavirus grants as high-risk individuals.

‘Being treated like bankrupt’

“I almost feel like, in a way, I’m being treated like bankrupt, that I’m being punished for something I’m not at fault,” said hospitality industry worker Lisa Harding.

Ms. Harding, 49, is buying property for the first time with a 10% mortgage. She said she could not get a mortgage because she was previously fired from her job in the hospitality industry.

She has now returned to her full-time job, but her creditors are still turning her down.

“I feel unjustly punished. Furlough was great at defending my work. But I didn’t expect to go out the other way – with a deposit, no debt, an impeccable credit rating, everything that should make me the perfect first time buyer – just to find out that the banks just won’t lend me. ” Ms Harding told the BBC.

The UK’s two largest lenders, NatWest and Royal Bank of Scotland, are denying mortgage applications from people who have received a government grant from the Self-Employment Income Support Program (SEISS).

Banks on the main street in Birmingham

Banks on the main street in Birmingham

“We are not currently accepting applications from clients who applied for a SEISS grant on or after July 14, 2020,” a spokesman told the BBC.

“As a responsible lender, this is part of the criteria for the bank’s financial availability,” they said.

The Yorkshire Building Society and TSB said they will need to see evidence that businesses have recovered from the pandemic, such as good employee turnover.

Lenders traditionally look at bills over the past two years to determine how much has been earned. This means that the Covid pandemic may continue to impact self-employed mortgage applications through 2023.

Self-employed people are also asked to make larger contributions. Metro Bank, for example, has stated that all clients who receive a SEISS grant will require a deposit of 20% or more. Santander has a minimum deposit of 25% for self-employed.

Most lenders contacted by the BBC, including Lloyds, Yorkshire Building Society, TSB and Virgin Money, said they would not accept mortgage applications from people currently on vacation. They also do not include post-vacation income as part of their affordability assessment.

Andrew Montlake, a broker at Coreco, said those in the hospitality, tourism and event industries will face these challenges for “some time” and that lenders need to be more “proactive.”

“We urge lenders to look at how businesses performed before the pandemic as a more likely benchmark for how they will perform afterwards.”

Some of these policies run counter to assurances from the Financial Conduct Authority, the banking supervisor.

An FCA spokesman said the SEISS grant or similar support “should not by itself prevent people from accessing credit.”

“Lenders must treat clients fairly when they apply for a mortgage,” the spokesman added.

There are fears that the millions of people who have taken advantage of Covid support schemes have not fully grasped the long-term implications.

“Self-employed people get more scrutiny”

Freelance artist Daniel Ellis was also shocked to find that he was not eligible for a mortgage because he had taken out a SEISS grant.

A 28-year-old man is saving money to buy his first home with his wife, Emily, in Derby. The couple’s estimated monthly mortgage payments will be a third less than what they currently pay each month for their rent.

But his bank, NatWest, told him he was not eligible for a mortgage because he took out a grant when theaters were forced to close.

“The mortgage system needs to change to reflect evidence of successful recurring rent payments, and we also think it is wrong that self-employed people are subject to more control than workers,” explained Mr. Ellis.

The couple says they had a hard time getting a mortgage from, in principle, another lender.

Country houses

Country houses

Consumer groups, including Fairer Finance, are now urging the financial regulator to urgently investigate which lenders are punishing borrowers in this way and to take action.

There are currently just over five million self-employed workers in the UK, according to the Office for National Statistics.

According to a survey by the Association of Independent Professionals and Self-Employed (IPSE), nearly 60% of self-employed borrowers said they felt punished by lenders for working for themselves when applying for a mortgage.

More than two-thirds of freelancers (70%) who received mortgages said that some lenders would not consider them at all because they are self-employed.

UK Finance, representing the industry, said lenders should conduct rigorous income checks to ensure that mortgages are available over the long term.

“Each lender will take a number of factors into account, such as the type of borrower, their employment status, income history, the sector they work in, and the type of property they want to acquire, when deciding how much to lend,” a finance spokesman said. UK. said.

The Treasury told the BBC that its £ 350 billion financial package has supported jobs and livelihoods throughout this crisis.

“It is important that lenders are able to conduct due diligence to ensure that people are not offered inappropriate loans,” said a finance ministry spokesman.

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