“Can I get a mortgage if I’m only on 80% pay?”

Sophie's possessions on the floorImage copyright
Sophie Hockin

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Sophie is getting used to living out of a suitcase after the deal to buy her first home fell through

“I have to laugh about this whole situation because if I didn’t I’d cry instead.”

Sophie Hockin, 29, was due to exchange on her first home on 6 April before the world changed and the deal fell through.

“The seller had financial concerns because of coronavirus and so pulled out”.

Sophie’s now on the look-out for a new home but is worried she won’t be able to get the same mortgage as before the pandemic, because her salary’s been cut.

“I still need to buy somewhere because I moved out of my rented accommodation in February, and am now house-sitting for a friend – only because he’s stuck in lockdown at his parents’ house though.

“But since lockdown, my salary was cut to 80% of what it should be, so I just don’t know what’s going to happen.

“My employer says ‘salary reductions will be reversed when deemed safe to return to a normal routine which is hoped to be in approximately three months’.

“But we just don’t know what’s going to happen – whenever are we going to ‘get back to normal?'”

Pay cut for millions

Sophie added; “I don’t want to go back to renting. It’s nearly impossible to save and I’d also have to get tied into at least a six-month or probably more likely a 12-month contract, which I really don’t want to do.”

Sophie is not alone. At least six million people have been ‘furloughed’ by their employer on the government’s Job Retention Scheme (JRS), which means for many their pay has been cut to 80% of their salary – up to £2,500 per month – which the government is paying.

But many others, who are still working, have also seen employers cut their wages, all of which could affect a person’s ability not only to get a mortgage, but also how much they could borrow.

UK Finance, the trade association for the banking industry, told Radio 4’s Money Box: “It will be a matter for each individual lender to determine exactly what approach to take, but under FCA rules lenders must lend responsibly and consider the affordability of the mortgage in the long term.

“It would not be in the customer’s interest to lend [them] more than they can reasonably afford. That is why a detailed income and expenditure assessment is undertaken before a mortgage is granted.”

For anyone wanting an answer about their own specific circumstances, the only way to find out is by contacting any potential mortgage lender, talk them through their finances and see what the lender says.

Image copyright
Sophie Hockin

Image caption

Sophie is getting used to living out of a suitcase after the deal to buy her first home fell through

Mortgage relief

Around two million people are thought to have made the most of the offer to take a three-month mortgage holiday from lenders.

Mortgage providers are also offering home-buyers who had exchanged contracts – but have not been able to complete the deal and move in – the option of extending their mortgage offer by up to three months, to allow the deal to take place after restrictions are eased.

That doesn’t help in Sophie’s case, as her previous mortgage offer was tied to the property she wanted to buy, which is no longer on the market.

Martin Stewart, founder and director of independent mortgage brokers, London Money, says most lenders are even more risk-averse than normal at the moment. “I would suggest if Sophie has had a 20% pay cut, lenders will be working off of her new lower figure and not her previous pre-crisis income. “If her employer is guaranteeing a return to full salary within a short period of time, it may be that some lenders can take a commercial view, but then a lot will depend on the other factors affecting the case – loan size, affordability, loan to value, credit score etc. They will also insist on written confirmation of when she may be returning to her full income. “Lenders are also paying much closer attention to the sectors that mortgage borrowers are working in. If they believe the at-risk industries such as tourism, aviation, hospitality etc are likely to take longer to return to any sense of normality, then they may well decide the risk is too high and ratchet back the lending or just simply not lend at all.”

You can hear more on BBC Radio 4’s Money Box programme by listening here.

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