Mortgage After Furlough – Do the Pandemic Years Still Affect the Property Market?

Many property investors and homeowners were likely scared by the lingering effects of the pandemic in recent years. Getting a mortgage after furlough, a SEISS loan, or other form of lockdown support may have been tricky between 2020 and 2022.

Officially, all Covid rules were scrapped in England on February 24, 2022, and we learned to “live with the virus[1]”. But, learning to live with the virus, at least in the property market, was easier said than done. Getting a mortgage after furlough, or any form of finance for that matter, wasn’t a simple process.

Analysis from United Trust Bank[2] conducted in the first half of 2022 illustrated this particularly well. Nearly two-thirds (64%) of surveyed brokers said their clients found it harder to get a mortgage after furlough. Also, 88% of self-employed clients who took out pandemic grants were “marginalised” by lenders.

Fortunately, some five years after Covid-19 first emerged, the worst of the pandemic years are firmly behind us. The financial sector has had time to adapt, and recover from those challenging years. Yet, the sheer scale of how we all reacted means borrowers will likely be dealing with the pandemic’s ramifications for some time.

A Bit of History and Context

Some, justifiably, may be wondering why we’re still focused on the “mortgage after furlough” issue at all, considering how our economy has largely moved on. While it’s true that relative normality has returned, we must remember that we are still covering the costs of the pandemic.

For better or worse, the government stepped in to keep the economy afloat in 2020 and beyond. It’s estimated that between £310bn and £410bn was spent by the state on Covid-19 support measures[3]. Support schemes, originally intended to last just a few months, were extended repeatedly as it became apparent that Covid-19 would be a long-term issue.

Two main plans come to mind. The furlough scheme, and the self-employment income support scheme (SEISS). Millions of workers received support from these two. Meaning millions ended up at risk of facing difficulty in getting long-term finance.

Furlough payments, courtesy of the coronavirus job retention scheme, were available between March 2020 and September 2021. Some 11.7 million jobs were furloughed through the scheme, costing £70bn in the process[4]. Many important sectors and employers ended up particularly reliant on state support. We saw huge swathes of claims from the accommodation and food services, manufacturing, and administrative support sectors.

We saw similar numbers from those who worked for themselves. SEISS grants were claimed by nearly 3 million individuals. Across the 5 available grants, £28.1bn was issued for 10.4 million claims, up to late 2021[5].

During the pandemic, many lenders restricted funding to those who received income from Covid-19 support schemes[6]. Eventually, criteria softened, but something resembling normal didn’t return for a while.

Some may believe that we still some ways to go until complete normality is restored. As such, we thought we’d take another look at some of the essentials for those questioning if they can get a mortgage after furlough.

Can I Get a Mortgage if I Have Been Furloughed Previously?

Broadly, yes, although it may make things more complicated. From a mortgage lenders perspective, there should be no real change in how an applicant is assessed if they’ve been furloughed, as they would still be classed as employed during this period[7]. The same will also be true for those who are looking to remortgage[8].

But, lenders will need to see proof that the applicant was indeed furloughed. This may include furlough letters, payslips, P60 forms, and more[9].

Also, there may still be some lenders who will embrace caution when it comes to reviewing a mortgage application from someone who has been furloughed. Those who are concerned about this should reach out to lenders to better understand their options, and/or work with brokers who can match them to the right lender for their circumstances.

Is It a Problem That I’ve Taken a Mortgage Holiday?

Mortgage holidays were an early form of Covid-19 support. With the support of the government behind them[10], mortgage lenders were encouraged to allow their borrowers to effectively pause their repayments if they were struggling during the pandemic.

It is still possible to get a mortgage holiday now[11], which may be suitable for some who are facing financial difficulties. Although, utilising a payment holiday can come with risks. For instance, it increases interest costs[12], and a mortgage holiday can show on a credit report, which may impact future applications[13]. While most lenders will likely be understanding if they see a mortgage holiday in an applicant’s background, especially if it was taken during the pandemic, it is still something brokers and borrowers should be mindful of.

Would I get a different mortgage rate if I’ve been furloughed?

Getting a mortgage after furlough in the current market is unlikely to be a major problem, and the rates available shouldn’t be skewed too much. Interest rates, currently, are more likely to be swayed by political turmoil, our cost-of-living crisis, and geopolitical challenges.

But, while having been furloughed in the Covid years is unlikely to have a direct impact, we’re collectively struggling with its long-term ramifications. While a multi-faceted issue, many people stopped working (voluntarily or not) during the pandemic, and we’ve struggled with worklessness ever since[14].

This has wide-reaching ramifications, not least of which is the impact it has on the property sector, and mortgage market. If a would-be buyer has been out of work for a prolonged period, it may be hard to secure funding. The government is focusing on getting more people into work, but it’s clear there’s no quick fix for this issue[15].

How Can Specialist Finance Help?

Fortunately, where borrowers and mainstream lenders struggle to come together in a post-pandemic landscape, the specialist market is there to offer reprieve. Bridging lenders specifically saw completions, applications and loan books total £1.4bn in the 3 months to September 2022[16].

A 15.9% increase on the previous quarter, and the sixth month in a row where the value of completions exceeded £1bn. Clearly, our industry adapted well to Covid-19 difficulties, and loan books in the bespoke market have only grown since[17].

Here at Market Financial Solutions, we lent throughout the pandemic and we have no plans to slow down in the aftermath. We assess deals on the value of the underlying assets, and the strength of the exit strategy.

We understand how the real financial world works. More importantly, we know that a borrower’s income history is unlikely to have been “normal” over the last few years. So, regardless of whether a borrower struggled to attain a mortgage after furlough, our products may still be accessible to them.

Furthermore, we can work with any blips on a record. We’ll look at the entire picture, and not just define an investor by negativity. We want to hear them you even if they’ve been through defaults, CCJs, or bankruptcies.

As high-street lenders struggle to adapt, we’ll be here to support those all but shut out of the mainstream. The last few years were incredibly challenging for everyone. So, we want to make sure that everyone has access to the finance they need as we leave Covid-19 behind.