A recent Mortgage Solutions poll asked: “Have you seen clients rejected for a mortgage after taking a payment holiday or using coronavirus support schemes?” Some 36 per cent of brokers reported they were unable to place a case due to a payment holiday or support scheme.
Others had to find an alternative route with 22 per cent going to other lenders while a fifth were asked to provide more details on clients.
More than 20 per cent of respondents reported no difficulties when placing cases for borrowers on mortgage holidays or support schemes.
Pete Lloyd, co-founder of Lloyd Wells Mortgages, said he had complications with two rejections this week alone, one with a specialist bank and the other with a high street lender.
“One has been delayed as the client had taken a payment holiday and they have asked to see three months of payments before offering on their mortgage.
“Realistically speaking, I will have to place them elsewhere if they want to complete quickly,” he said.
The borrowing amount of the second application was reduced as the self-employed client had applied for the Self-Employment Income Support Scheme (SEISS) grants despite not needing it because he was advised to do so by an accountant.
James McGregor, director of Mesa Financial Consultants, said he had also run into some issues with an ongoing case as one lender was refusing to port a client’s mortgage because a payment holiday had been taken.
However, he had successfully completed other payment holiday cases.
He said: “No lenders have come out and clearly stated it is going to impact their decisions, but I guess they can’t deal with the press backlash if they did.”
Extra detail
Sandy Ameer-Beg, owner of Acclaimed Mortgage Consultancy, said she was happy to provide the required additional information if it meant her client would satisfy affordability requirements.
Akhil Mair, managing director of Our Mortgage Broker, said in the past four months he had noticed a vast number of lenders asking clients to sign and declare whether they had taken a payment break, but had prepared for this with extra measures.
“We anticipated these questions during lockdown and ensured we asked our clients in the fact-finding process so we know the client’s full financial position before submitting a full application for a purchase mortgage or remortgage,” he said.
“The lenders are assessing each case on its merit and in turn we are providing the lender with a detailed synopsis of why the clients applied for a payment deferment, whether or not they are now up to date and what steps have been put in place to return,” he said.
Howard Reuben, principal at HD Consultants, agreed with the onus being on the broker to supply lenders with supporting information as he said lenders had been “excellent” in communicating any criteria updates or how deferments could affect applications.
He added: “It’s down to the broker to research even deeper now to make sure that the application will successfully progress to an offer without being pulled due to the applicant failing the new deferment, furlough or bounce back loan risk profiling.”
A mixed bag
Cases at Reuben’s firm could fall under all the poll responses, he claimed, as the treatment of different cases had been mixed.
For example, a client of his was almost declined on a limited company special purchase vehicle buy-to-let remortgage as their other limited company had taken a bounce back loan.
Following discussions with the lender, the client agreed to repay the loan and the mortgage offer was ultimately issued with supporting evidence.
Balanced approach
A deeper understanding of why borrowers may take payment holidays or apply for financial support is a factor brokers said needed more attention.
McGregor said: “Most directors of businesses would have done this as a precaution as they would not know how long their business would not be generating income for.
“It seems a bit strange to me that an underwriter would punish a business owner for trying to protect a business through a global pandemic.”
Considering his client’s ability to repay the loan, Reuben said he appreciated why some borrowers would take financial support even if they did not need it as many of his clients applied for it in case a second wave occurred, and the same support was not available.
“Their approach is to take it now and if not needed, repay within 12 months to avoid incurring interest,” he said.
