Can you remortgage if you’ve been furloughed because of the coronavirus?

September 14, 2022

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Homeowners who’ve been furloughed face significantly fewer options if they need to remortgage, potentially leaving them paying better pay, Which? research has found.

The government’s Coronavirus Job Retention Scheme (CJRS) will pay grants to the employer that furloughs its staff rather than letting them go. The grants count 80% of wages as much as lb2,500 a month, but employers might want to top this up to 100%.

We contacted the UK’s biggest lenders to find out whether they’ll take furlough pay into account on remortgages, and found that some homeowners may have fewer options and may lose out on cheaper deals from other banks.

Here, we examine your remortgaging options during the coronavirus outbreak and let you know that lenders are conducting mortgage valuations throughout the lockdown.

Can I switch deals with my current lender?

If you’re visiting the end of your fixed term, one choice is to change to another product with your current bank or building society. This is known as an item transfer, and can usually be done over the phone or online.

Can I switch after being furloughed?

The UK’s 10 biggest mortgage brokers have all confirmed that? that existing customers remortgaging on a like-for-like basis won’t have to undergo affordability assessments. This means there’ll be no damaging effects for individuals who’ve been furloughed.

If you’re borrowing additional cash when remortgaging, however, your lender will need to assess your money, so you may struggle to borrow more if you’ve been furloughed.

What if I’ve taken a payment holiday?

The trade body UK Finance has confirmed that banks and building societies have collectively agreed to allow customers who’ve taken mortgage payment holidays to create product transfers without requiring an affordability assessment.

This means going for a loan payment holiday should have no effect on your ability to switch with your current lender.

Remortgaging to another lender

There are more than 50 lenders within the mortgage market, therefore if you’re seeking out the very cheapest rate, odds are it won’t be with your present bank.

That said, remortgaging to a different lender might be tricky if you’ve been furloughed. This is because some lenders will assess affordability based purely in your furloughed income (that is up to 20% less than usual), yet others may not consider it whatsoever.

We asked the UK’s biggest lenders to explain their policies. Here’s what they said:

Lloyds Banking Group (Lloyds Bank/Halifax/Bank of Scotland): Will consider changes in circumstances included in the application.
Royal Bank of Scotland/NatWest: Will use actual furloughed income in assessments and ask for payslips to verify income.
Nationwide: Furloughed applicants will be assessed based on 80% of their usual income as much as lb30,000 gross. Employer top-ups accepted susceptible to written confirmation.
Santander: Will use actual furloughed income in assessments and could need a letter from employer.
HSBC: Furloughed applicants will be assessed based on 80% of their usual income up to lb30,000 gross. Will take employer top-ups into account.
Coventry Building Society: Furloughed income only accepted on applications up to 65% loan-to-value (LTV). Will require employer top-ups into consideration. Needs a letter from the employer confirming income.
Virgin Money: Will require furloughed income into account when assessing affordability.
Yorkshire Building Society: Considers applications on the case-by-case basis and assesses the sustainability of income. If the applicant only has furloughed income, this is considered based on the level confirmed through the employer.
TSB: Will consider applications where a customer can provide evidence their clients are topping as much as their normal salary or has committed to re-employment.

Should you remain together with your current lender?

If you’re visiting no more your fixed term, it’s important to switch deal before you’re moved on for your lender’s standard variable rate (SVR), which is much more expensive.

There are thousands of mortgage deals out there, and in normal times the smart move would be to start looking to your options around six months before the end of your fixed term.

If you start looking early, it is possible to generate a deal with a new provider as much as 6 months prior to the end of the current one. If you decide on an item transfer together with your current lender, you can usually arrange this around four months before your fixed term ends.

If you’re worried about finding a suitable deal as a result of damages, consider taking expert consultancy from the whole-of-market mortgage broker. A great broker is going to be well-versed on most up-to-date policies and can offer tailored advice on the right product for your circumstances.

How are banks doing valuations?

With the present lockdown measures in place, banks can’t send staff to properties to conduct a mortgage valuation. With this in mind, the biggest lenders are increasingly using automated valuation models (AVMs) and desktop valuations.

AVMs use computer algorithms to assess a property’s characteristics and recently sold properties in the local area to estimate the current value. Desktop valuations are undertaken remotely by a qualified valuer.

All of the most popular lenders said they’re using these systems, however, many have outlined their rules on which properties qualify:

Royal Bank of Scotland/NatWest: Desktop valuations available up to 95% LTV, automated valuations as much as 60% LTV. New-build, blocks of flats and buy-to-let not currently available.
Nationwide: New-build accepted if Nationwide has visited the property within the last 12 weeks. Blocks of flats, Houses in Multiple Occupation and properties requiring full surveys not currently available.
Santander: New customers allowed desktop valuations as much as 75% LTV with a maximum loan size of lb500,000.
HSBC: Available up to 90% LTV.
Coventry Building Society: Available as much as 85% LTV, or 50% LTV on flats. On buy-to-let remortgages as much as 75% LTV, or 50% on flats.
Yorkshire Building Society: Available as much as 85% LTV on remortgages, 75% LTV on purchases and 65% LTV on buy-to-let remortgages. Not available on new-build, flats, non-standard properties and those worth lb1m or more.
TSB: Limited with a product types and subject to restricted LTVs. New-build unavailable.

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