Can you get a mortgage on furlough? Lenders are tightening the screws but if you know where to look, it is possible

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The number of UK workers looking for furlough-friendly mortgages skyrocketed during November following the extension of the Coronavirus Job Retention Scheme last month.

Searches for mortgage products suitable for furloughed borrowers rose 230 per cent between October and November, according to Legal & General Mortgage Club.

Its SmartrCriteria tool, used by advisers to match customers with suitable lenders, recorded 577 searches for furlough-friendly mortgages in November, up from 175 searches in October.

The number of searches for furlough friendly mortgages has risen sharply since the Job Retention Scheme was extended

'Following the Chancellor's announcement last month, we are seeing more borrowers turn to the expertise of advisers to find furlough-friendly mortgages,' said Kevin Roberts, director at Legal & General Mortgage Club.

'Our latest findings from SmartrCriteria suggest the numbers of people looking for these products increased significantly in response to the extension of the scheme.'

For those furloughed workers still hoping to take advantage of the stamp duty holiday and press ahead with their home buying plans, Roberts said there are still options open to them.

'Furloughed workers still need access to mortgage products and they shouldn't assume that their circumstances mean they are locked out of the mortgage market,' he said.

'There are options and speaking to an independent mortgage adviser who can help navigate the available products should be everyone's first step.'

Furlough income won't suffice 

Since the job retention scheme was extended, most lenders have not been accepting furloughed income according to David Hollingworth, associate director at L&C mortgages.

'In most cases lenders will now want to see that the borrower is back at work with a letter from the employer and at least one payslip confirming this,' said Hollingworth.

'Some lenders may be able to consider it on a case-by-case basis but for many they will need to return to work as furlough income is not being accepted by most lenders.' 

Returning to work? 

For those furloughed workers looking to buy before the stamp duty holiday ends there is still hope albeit with limited options.  

'For those determined to buy, the good news is there are a few lenders who will consider furloughed workers as long as they have a return to work letter, with the confirmed return date,' said Richard O'Reilly, a mortgage expert at Habito.

The two main lenders currently accepting applications from those on the furlough scheme are Santander and Barclays.

'If you can afford to wait, our advice would be to wait until you have returned to work,' said O'Reilly. 'This will open up more lenders and potentially better interest rates.' 

Remortgage with your existing lender 

For those remortgaging, being on furlough should not impact their ability to switch to a new deal with their current lender.   

'It may be better to stay with your existing mortgage provider rather than try to remortgage away,' said Mark Harris, chief executive of mortgage broker SPF Private Clients.

'Those on furlough should consult a mortgage broker for advice as there are a wide range of approaches taken by lenders,' said Harris. 'A broker will know the best lender to approach.'