FURLOUGHED workers may find themselves unable to get a mortgage through TSB after the lender started listing their salary as just £1.
TSB typically offers a loan of up to 4.5 times an applicant’s wages – meaning furloughed staff may only be able to borrow £4.50 for a new home.
The lender says it will only consider furloughed workers if their employer is topping up their salary.
TSB will also accept mortgage applications with a joint partner as long as they “remain affordable” – but again, the person on furlough will have their salary listed as £1.
The furloughed worker will be required to provide proof that their boss is committed to keeping them employed.
TSB says this evidence can be provided in the form of a letter dated within four weeks of the date of the full mortgage application.
What is furlough?
THE aim of the government’s job retention scheme is to save one million workers from becoming unemployed due to the lockdown.
Workers will be kept on the payroll rather than being laid off.
The government will pay the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on top, although employers will need to start contributing from August.
The scheme has been extended to run until the end of September and can be backdated to March 1 2020.
It’s available to all employees that started a PAYE payroll scheme on or before March 19, 2020, although it closed to new entrants in June.
Previous rules meant that staff shouldn’t undertake any work for their employers while on furlough.
But from July 1, staff members are allowed to go back part-time and they must be paid in full for the hours that they work.
This letter must say when the employee will return to work and whether they’ll be returning full-time or part-time.
TSB will also need to know that your boss plans on contributing toward your national insurance, pension contributions and salary, as per the requirements of the furlough scheme for anyone continuing to be furloughed beyond July 31, 2020.
You can find more information about being furloughed in the box above.
For self-employed workers, applications will only be considered if the borrower can provide proof of business turnover.
Applicants who haven’t been furloughed can apply for a mortgage as normal.
The bank has toughened its rules due to fears that furloughed workers are at higher risk of being made redundant.
It’s likely the restrictions will affect thousands of employees in the travel and hospitality industries, which have both been crippled by coronavirus.
TSB says on its website: “As part of our responsible approach in helping customers to borrow well, we no longer accept furloughed income where the customer’s salary isn’t being topped up by their employer.
“For joint applications which remain affordable on the other customer’s income, employment details should be captured and income keyed as £1 for the furloughed customer.
“Where the customer’s employer is topping up their furloughed income to 100 per cent, the employer must provide confirmation that they are committed to ongoing employment.”
It comes after property asking prices topped £320,000 in a record high due to an “unexpected mini boom” surge in demand.
The average asking price in July stood at £320,265 – 2.4 per cent or £7,640 more than the previous record high in March before lockdown – according to property portal Rightmove.
In March the average asking price was £312,625, which was a record.
Are other lenders allowing furloughed workers to apply for a mortgage?
THE housing market has been spooked by coronavirus, with lenders tightening their rules for borrowers.
While TSB only takes £1 of a furloughed worker’s salary into account, here’s what the other banks and building societies are doing:
- Nationwide: Nationwide will take 80 per cent of the borrower’s income into account. If their employer is topping up their salary, they’ll need to prove this.
- NatWest: NatWest will base its affordability assessment on the new revised furloughed income. Brokers will need to obtain evidence of their client’s new earnings.
- Barclays: Barclays will take 80 per cent of the borrower’s income into account, based on a basic income up to a maximum of £30,000. Again, borrowers will need to prove if their employer is topping up their wages.
- HSBC: HSBC will use furloughed income to make an assessment. Any additional salary that’s been topped up by an employer will need to be proved.
- Virgin Money: Not allowing furloughed workers to borrow
- Loughborough Building Society: Not allowing furloughed workers to borrow
- Bluestone Mortgages: Not allowing furloughed workers to borrow
Nationwide and NatWest have also tightened their lending and require additional evidence of furloughed earnings.
Nationwide has started offering a 10 per cent deposit again after the stamp duty cut gave the housing market a boost earlier this month.
Yorkshire Building Society’s Accord brand has also come back at this rate.
Virgin Money, Loughborough Building Society and Bluestone Mortgages are refusing to offer mortgages to furloughed staff.
The Sun has asked TSB if the rules apply to both new mortgage applications and people who’ve passed an affordability test and we’ll update this article if we hear back.
We’ve rounded up the banks and building societies that are offering 5 per cent and 10 per cent mortgages.
House prices have rocketed to over £320,000 in record high after “unexpected mini boom”.
How a stamp duty holiday would affect the property market and house prices.