Having seen the full impact of the pandemic on lenders, employed applicants, Buy to Let Landlords, and self-employed applicants, the biggest impact by far has been on self-employed applicants.
Pandemic effect on the mortgage industry
Obviously, anyone that has had their work or income affected by the pandemic will have gone through a significant period of uncertainty, but banks and lenders seemed content to continue to lend to landlords, employed applicants, and those on furlough without any significant hassle other than to get confirmation that they would continue to get paid, and would at some point in the future return to work on their pre-furlough wage.
Self-employed mortgage applicants
Self-employed applicants on the other hand have been made to jump through some significant hoops as their businesses absorbed the effect of the pandemic, where they were unable to trade based solely on government guidelines, took on government-backed loans and grants to get through possibly the toughest time they will have seen.
Another significant hurdle that had to be jumped was if their mortgage came up to be reviewed, or they wanted to move home for any reason.
Lenders criteria changed almost daily regarding self-employed applicants, some reduced the level of lending they would agree, some wanted to understand the position of the business pre, during and what it may look like post-pandemic, if a business took a Bounce Back loan, CBIL’s (loan) or a government grant then this started to have consequences for personal mortgage lending, and they effectively needed to share practically every part of their lives and business to be, hopefully, granted a mortgage.
Mortgage lenders’ reaction to the pandemic
We still see this process happening with lenders, even though the majority of the UK economy is back up and running, but lenders are still very cautious when a self-mployed mortgage application lands on their desk and will want to truly see under the bonnet of the company before agreeing to the mortgage!
Ultimately a bank will only lend when they have a fair degree of certainty that the applicant is able to pay the monthly mortgage payment over the long term, and that they effectively are not going to lend money to someone where the mortgage may actually put that person in greater financial difficulty sooner rather than later.
Response from mortgage brokers
As mortgage brokers, we are having to fight harder to get the lender to see the light at the end of the tunnel, provide more proof that the business is viable e.g. invoices that have been sent and then corresponding bank statements showing payments received into the business after the application has been submitted, future order’s, cash flow since re-opening…
We as brokers have strived to keep up to date with constant criteria updates and changes particularly levied against the self-employed, we will identify who will be best placed to accept the self-employed application from a hairdresser to an accountant, to a builder, to a physiotherapist.
Self-employed mortgage advice
Ultimately we will review the information needed before identifying the lender, and will happily navigate the lender’s criteria, wants, and wishes at the point of application. Therefore, we would highly recommend speaking to a mortgage broker if you are self-employed or have struggled to find a lender and if you have taken any government support whether that be a government grant, or a bounce Back Loan, or CBIL’s (loan).
For more information on how self-employed applicants can position themselves effectively prior to looking to apply for a mortgage see our other blog ‘What to consider if you are self-employed and looking to arrange a mortgage’
