An estimated one million furloughed workers face the risk of unemployment when the government’s job retention scheme comes to an end in October, according to research by the Resolution Foundation.
Meanwhile, predictions from the Office of Budget Responsibility suggest three million – 12% of the UK workforce – could be unemployed by the end of the year.
Borrowing on furlough
Now Trussle has offered guidance to anyone facing uncertainty in their remortgaging or house buying plans due to being on furlough.
It said 70% of lenders had tightened their policy when it came to applications from people on furlough. Metro Bank will not lend to furloughed employees with 10% or less equity or deposit.
TSB will no longer be accepting furlough incomes without top-ups from employers and HSBC has toughened its criteria this week. Indeed, the bank said it would no longer accept income from those who had been furloughed without a return to work date, or whose return to work date was more than three months away.
Miles Robinson, head of mortgages at Trussle, said: “There are many uncertainties homeowners and house hunters are facing post-lockdown.
“The end of the furlough scheme is fast approaching and the deadline on mortgage payment holidays will also be in sight sooner than we think.”
Trussle has offered the following tips on making savings and cutting costs to help anyone in this situation to prepare for the challenges ahead.
Are you likely to lapse to your lenders SVR?
The standard variable rate – or SVR – is the interest rate your mortgage will default to if you reach the end of the deal and don’t remortgage.
Trussle said, for the average borrower, the difference between a market-leading deal and the average SVR is around £4,500 in extra interest each year – an amount that can go a long way in terms of other living expenses or saving for the future.
Use a remortgage calculator to find out the savings you could make by switching to a new deal. You should review your mortgage three to six months before the end of your initial period to give yourself plenty of time to find and switch to a new deal.
Consider taking a mortgage holiday
Trussle said it was clear mortgage payment holidays had proved a vital lifeline for some homeowners who had suffered financially as a result of the Covid-19 lockdown measures.
If you’ve been part of the furlough scheme and are worried about your future employment status, there is still time to speak to your broker about taking a payment holiday.
If you haven’t taken a payment holiday already, you can apply to take one up until 31 October 2020. If you have taken an initial payment holiday and are still struggling financially, you can speak to your lender about extending for a further three months or begin making reduced payments.
It’s worth noting that once the mortgage payment holiday is up, your monthly payments will increase slightly. This is because the additional interest is added to the total mortgage balance.
Consider switching to interest-only
Another way to ease financial pressure is by switching your mortgage payment plan to interest-only.
Trussle said, adjusting mortgage repayments so that only interest is paid can save homeowners a significant amount on their monthly payments.
The money saved can be put into a savings account, or used for other essential expenses.
Interest-only is not always suitable for all borrowers and there are a number of factors to consider. Read more in this article or check Trussle’s guide to see if this might be right for you.
Look into product transfers
A product transfer is when borrowers move to a different mortgage with their current lender. Trussle’s data shows homeowners who go through a product transfer save on average £326.31 per month.
To put this saving in perspective, the average UK household spends £60.60 per week on food, so a product transfer could cover more than your monthly food budget.
Homeowners can check their eligibility for a product transfer with their existing lender to see if they could save money.
Check if you can save by remortgaging
If you’re worried about how your job might be affected by the furlough scheme ending, Trussle encourages you to keep an eye on your mortgage.
Mortgages are often the biggest monthly bill that people face, and by remortgaging homeowners could save an average of £326 a month.
It’s important to note that if you’ve been furloughed, remortgaging might be trickier, but not impossible.
If you choose to remortgage with your current lender for a similar loan size you may not need to go through affordability checks.
However, if you decide to remortgage through a different lender or for a higher amount, it’s likely that you will need to go through affordability checks and that the lender’s decision will be based on your furloughed income only, excluding bonuses and overtime pay.
Each lender’s criteria varies so it’s important to seek advice from a mortgage broker before progressing with an application. Find out how much you could potentially save by using Trussle’s remortgage calculator.
Consider applying for a Green Homes Grant
The Green Homes Grant was announced by chancellor Rishi Sunak in his recent mini-budget. The policy means that citizens will be reimbursed for green home improvements.
Registration for the scheme opens in September, but it’s a good idea to consider what improvements would be suitable for your home now.
Making green improvements will not only have a positive impact on the environment, but also on your finances, as boosting the efficiency of your home means lower bills.
Talk to your landlord about a payment plan
If you’re renting and struggling to meet your monthly payments, have a conversation with your landlord. In this time of national crisis, landlords are expected to work with tenants to create realistic payment plans for unpaid rent.
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