Barclays and Halifax are sticking to their existing self-employed criteria which asks borrowers for proof of earnings for the latest two trading years. The latest tax returns cover the tax years 18/19 and 19/20 so if a borrower applied for a mortgage now, pandemic trading is not assessed. However, the banks did not divulge how they will view the 20/21 trading period or if they plan to change their policies in the future.
Barclays has confirmed that for businesses closed in 2020 it will take into account self-employed income support measures as part of income.
NatWest hinted that changes to its policy that excludes borrowers who have applied for a Self-Employment Income Support Scheme (SEISS) would soon follow.
Nationwide says it will continue to refer most of its self-employed cases to an underwriter who decides on a case by case basis what is required to support the application.
HSBC’s current approach is similar to the stance taken by Santander. The bank asks for business bank statements from January, February or March 2020 and the last 60 days’ worth of business bank statements to provide a view of pre-pandemic and current trading conditions.
Santander announced its change of policy last week. The bank moved to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings.
To help brokers calculate how much their clients can borrow, the bank launched a broker-only calculator this week on its intermediary website this week.
Brokers praised the decision and called for other banks to follow.
Although none of the banks Mortgage Solutions approached were planning to adopt Santander’s approach, NatWest said changes to its policy were coming.
A NatWest spokesperson said: “We are currently reviewing our policies for self-employed customers who have applied for a SEISS grant. We are looking to update our policies and affordability calculators in the near future to better support these customers. We continue to consider other forms of income to support an application for self-employed customers such as rental, employed income or other businesses.”
A spokesperson for Nationwide said: “The impact of Covid-19 means that underwriting mortgages for self-employed borrowers is much more complex than before as a result of the difficulties in being able to fully assess long-term affordability in these uncertain times.
“Therefore most self-employed applications continue to be referred to our underwriters who will confirm on a case-by-case basis if they require additional evidence to support their assessment.”
Additional evidence includes accounts, business bank statements, work contracts, details of what government support applicants have received and details of what impact Covid-19 restrictions have had on the applicant’s business and any adaptations they made.