Some business owners whose companies have used the furlough scheme or other government support are being penalised by residential mortgage lenders on the grounds that their future profitability is in question, brokers report.

Private Finance mortgage consultant Chris Sykes says: “Recently, we have come across cases where business owners who had furloughed staff or taken a ‘Bounce Back’ loan have been rejected for their own residential mortgages. 

“This has partly resulted from lenders reacting to having less visibility over companies’ long term profitability, causing them to intensify their scrutiny of borrowers’ ability to repay new loans. 

“But cashflow issues are likely to be a temporary state of affairs.

“Lenders should consider clients’ strong repayment record prior to the pandemic especially when a business has been running for many years.

Sykes says the impact on those individuals is similar to the ways in which borrowers may be adversely affected by taking a payment holiday, but he believes lenders should take a long-term view.

He adds: “Furloughing staff and applying for loans is unfairly becoming a sign of a struggling business.

“We believe lenders need to adapt quickly to these changing times. 

“Those who remain static will lose incredibly valuable customers like company directors and business owners going forward.”

Sykes is not the only broker to report this.

The Mortgage Mum managing director Sarah Tucker says: “We are hearing the same. 

“West Brom, for example, advised us that if a borrower has taken a bounce-back loan it needs to be included as a commitment even though it is interest-free for the first year.”

Active Mortgage managing director Gary Das says he has yet to see business owners rejected because their firm has used government support schemes, but warns there is greater scrutiny over earnings.

He says: “What we have seen is lenders requesting three months’ bank statements to show income still matches previously filed accounts or SA302s.”