Mortgage arrangements can be very important for a number of reasons, and Britons will want to ensure the process is as smooth as possible, whether purchasing a home, or remortgaging. However, the receipt of Government aid during this time, such as SEISS and furlough established by Chancellor Rishi Sunak, has been equally important to millions of people. This kind of help, though, could potentially be detrimental to a person’s mortgage hopes, creating possible chaos later down the line.
Express.co.uk spoke to Matt Coulson, Director at Heron Financial, who discussed the impact of Government schemes such as SEISS and furlough on mortgage arrangements.
He said: “Having received support through SEISS is unfortunately a red flag for many lenders. That has been the area which has been most impacted, and in my opinion, most penalised by what has happened.
“To begin with, while lenders were perhaps caught off guard, there was a period of about a few weeks where there wasn’t such a great impact on self-employed people.
“But it wasn’t long before lenders started to introduce question sets around having taken Government support schemes, local authority grants, or whether self-employed people have furloughed their staff.
“Answering yes to any of these questions is then taken by the lender to mean a business is ‘in trouble’ and that is deemed as a reason not to want to proceed with a person’s application.”
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This could mean further complications as people must be totally upfront within an application.
He explained: “Some lenders have gone with really broad brush question sets, such as ‘Has your business been impacted by coronavirus?’ – well, show me a business which hasn’t!
“As soon as you answer yes, which of course you have to, because it’s a mortgage application, all of a sudden Pandora’s Box is opened.
“Unfortunately, self-employed people have really borne the brunt of this and have had real issues throughout this crisis.”
For self-employed people in receipt of SEISS, even processes of mortgages are now changing, as Mr Coulson explored further.
He said: “Many lenders have now moved self-employed people to an almost entirely manual underwriting process, and aren’t allowing their systems to generate decisions in the same way they would usually for an employed person.
“They want to look at bank statements, they want to look at trading accounts, they want to see 12 months history of business, they want to see invoices. It’s all pretty archaic.
While self-employed individuals who have been in receipt of SEISS support may face challenges, these difficulties may also extend to those on furlough.
Furlough or the Coronavirus Job Retention Scheme, was designed to cover part of the salary of those temporarily unable to work.
But as Mr Coulson explained, this could also see lenders look at individuals in a different light.
He added: “As far as furlough, there are probably about four or five mainstream lenders who will consider an application if you are enrolled on furlough at the moment.
“However, there are strings attached to this also, and they might limit your loan to value, or they may want to see another applicant with you not affected by furlough.
“The situation isn’t quite as bad as the self-employed, but there are hoops to jump through and people should be aware some lenders are just giving a flat out no.”
The situation remains a complex one for those who have been able to gain financial aid from the Government.
It remains to be seen how these individuals will be able to navigate the mortgage market going forward.
And with at least one further SEISS grant expected to be announced by the Chancellor in his March Budget, difficulties may continue.
Mr Coulson concluded: “We’ve unfortunately now got a situation where many people who have accepted Government support are now effectively mortgage prisoners.
“It’s a rock and a hard place about whether you accept the support, or if you go it alone and it is putting people into really tough decision making positions. That’s wrong, I think, and a really awful situation to put someone in.”