Picture this: a pandemic hits the globe, unlike anything we have known. Governments go into a tailspin and countries are locked down; as a result many businesses are in danger of going bust.
To save the UK economy from damage beyond repair, the government announces support measures, including a furlough scheme, and works with banks to allow mortgage borrowers to take payment breaks to prevent them going into arrears.
Flash forward nine months or so and things seem to be coming right, at least in the UK, and lenders pile back into the market with high-LTV products and low interest rates. Borrowers who had taken a mortgage ‘holiday’ but are making payments again, or were furloughed but are back at work, begin looking at options to remortgage or buy for the first time. But some are turned down because they or their employer availed themselves of measures put in place to keep the economy moving. It just doesn’t add up.
It beggars belief that borrowers who thought they were doing the sensible thing for their financial health by taking up this payment ‘holiday’, which was so widely promoted, are being punished for doing so.
Even more incredible is the fact some banks reportedly have turned down applicants whose employer accepted financial support from the government, even if the borrower themselves was not part of the scheme. There may be limited funding available but, if lenders choose to apply such rules, they should be clear from the outset and consistent, not make borrowers feel they have done something wrong by making use of a scheme to keep them afloat.
In a discussion Mortgage Strategy hosted recently, the very valid point was made that the regulators should step in to prevent this sort of carry-on, or at least to declare if they deem it acceptable that applicants are being turned down because they took a mortgage ‘holiday’ or were furloughed, or their employer has received Covid benefits. This needs to be made clear to borrowers from the start of an application.
After a year where so many struggled, the last thing borrowers need is more confusion and grey areas in the mortgage market.
