The pandemic still haunts us, if only via its aftereffects. If you claimed support during the lockdown years, you may end up struggling to move forward with your property investment plans.
Brokers in the specialist lending market saw noticeable shifts in 2022. Their clients with complex incomes struggled to get far with mainstream lenders. This is especially true for those who saw their incomes upended by Covid-19 support.
Nearly two-thirds (64%) of brokers found their clients who experienced furlough have found it harder to get a mortgage, according to research from United Trust Bank. What’s more, 88% of self-employed clients who took out pandemic grants have been “marginalised” by lenders.
Despite the worst of the pandemic being behind us, it looks like we’ll still be dealing with the runoff for a while. In this blog, we’ll explore just how many people could be affected, why high street lenders are unlikely to become more accessible anytime soon, and how specialist finance can support you.
Source: United Trust Bank
Just how many people are affected by this?
For better or worse, the government stepped in to keep the economy afloat in 2020 and beyond. Support schemes, originally intended to last just a few months, were extended repeatedly as it became apparent that Covid-19 would be a long-term issue.
Two main plans come to mind. The furlough scheme, and the self-employment income support scheme (SEISS). Millions of workers received support from these two. Meaning millions could be at risk of facing difficulty in getting long-term finance.
Furlough payments, courtesy of the coronavirus job retention scheme, were available between March 2020 and September 2021. Some 11.7 million jobs were furloughed through the scheme, costing £70bn in the process. Many important sectors and employers ended up particularly reliant on state support. We saw huge swathes of claims from the accommodation and food services, manufacturing, and administrative support sectors.
We saw similar numbers from those who worked for themselves. SEISS grants were claimed by nearly 3 million individuals. Across the 5 available grants, £28.1bn was issued for 10.4 million claims.
During the early stages of the pandemic, many lenders restricted funding to those who received income from Covid-19 support schemes. Eventually, criteria softened, but complete normality hasn’t returned.
And this is before we consider the potential blowback from other forms of Covid-19 support. Between 2020 and 2022, countless people utilised mortgage holidays, coronavirus business interruption loans (CBIL), eviction bans and more.
Source: House of Commons Library, Statista, HMRC, Mortgage Solutions
Why were banks hesitant and are they still struggling?
Furlough payments and other forms of support posed a unique challenge for high street lenders. Long-term mortgages are primarily dependent on affordability, which is assessed through a person’s income. At the time, it was unclear what would happen to furloughed workers once the funds dried up.
Our economy had never faced a global pandemic before. No one was entirely sure how many people would have jobs to go back to once the dust settled. This made banks nervous and hesitant to lend. And while we’ve largely moved on from this kind of support, new economic challenges are still making banks weary.
As inflation and interest rates started to rise, mortgage lenders pulled deals from the shelves. Over 1,600 residential mortgage products were withdrawn by late-September 2022. Moreover, over 20 providers removed their entire fixed rate mortgage ranges.
Mortgage deals have since returned. But that doesn’t mean they’re necessarily attainable. As if it wasn’t already difficult enough for furloughed workers, banks tightened their criteria even further. Even affluent applicants with few issues in their backgrounds are being rejected due to missed bill payments and even disputed parking tickets.
Source: BBC, The Guardian, The Telegraph
How can specialist finance help?
Fortunately, these will be non-issues for specialist lenders. In fact, bridging lenders saw completions, applications and loan books total £1.4bn in the 3 months to September 2022. A 15.9% increase on the previous quarter, and the sixth month in a row where the value of completions exceeded £1bn.
Here at MFS, we lent throughout the pandemic and we have no plans to slow down in the aftermath. We assess deals on the value of the underlying assets, and the strength of the exit strategy. We understand how the real financial world works. More importantly, we know that your income history is unlikely to have been “normal” over the last few years.
Furthermore, we can work with any blips on your record. We’ll look at your entire picture, and not just define you by negativity. We want to hear from you even if you’ve been through defaults, CCJs, or bankruptcies – let alone parking disputes.
As high street lenders continue to lend to only the most vanilla of cases, we’ll be here to support those all but shut out of the mainstream. The last few years were incredibly challenging for everyone. So we want to make sure that everyone has access to the finance they need as we leave Covid-19 behind.
Source: Specialist Lending Solutions
MFS are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice.