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Mortgage Outlook: Santander launches mortgage calculator for self-employed borrowers affected by the pandemic

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Santander will be launching a mortgage calculator for self-employed borrowers whose businesses have been affected by Covid-19, it has been reported by Mortgage Solutions. Earlier this month, it was announced that brokers will exclusively be able to use the calculator for ‘Covid-affected’ clients who want to disregard their 2020/21 accounts because the pandemic has damaged their earnings, to find out how much the bank is prepared to lend.

The bank has changed its lending policy to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings. However, said Santander, also refers to Covid-19 affected borrowers as those who have relied on one of the government’s support measures such as the Self-Employment Income Support Scheme or the Coronavirus Business Interruption Loan Scheme, or a tax deferral.

What’s the self-employed mortgage criteria?

The lender said it will be taking into account future Covid-19-related liabilities and they will be treated as a business commitment. An additional layer of criteria means that to be accepted under Santander’s Covid-19 accounts exception, businesses must have been trading for at least 90 days after reopening.

Santander has also imposed harsher restrictions on self-employed borrowers, excluding them from its lower-deposit mortgage deals. The bank has said that new self-employed customers will only be offered mortgages to cover a maximum of 60 per cent of a property’s value. That means self-employed first-time buyers and most home movers will require a 40 per cent deposit to qualify for a Santander mortgage.

Half of Santander’s self-employed borrowers unaffected by COVID

If borrowers want to use their 2020/21 earnings, head of business development mortgage division, Graham Sellars told Mortgage Solutions that it was “business as usual” and brokers do not need to call unless they needed support.

Speaking to Mortgage Solutions, Sellars said: “Half of Santander’s self-employed borrowers have not seen any impact on their businesses.

“The other half have been affected in varying ways, from being shut throughout each lockdown like hairdressers, for example, or just losing earnings in the first lockdown like tradesmen for instance. Whatever the scale of the damage, we see 2020/21 as an aberration, and not a normal trading period.”

Brokers want to see more lenders follow Santander’s lead, but others are slow to follow suit.

Simon Butler, head of mortgages at CMME, said in the report: “This is a strong indication from one of the UK’s largest lenders that they value the self-employed sector.

“Last year had a detrimental impact on the finances of many small businesses and the attitude across the mortgage industry has been excessively cautious at times, rather than supportive of business owners.

“We hope other lenders take note of this and review their individual criteria as there are many ways to approach adversity, as Santander have shown.”

Average loan amount offered to self-employed applicants is down

Research by MBT showed that 71% of self-employed cases processed through its platform in January 2021 were affordable, with 27% deemed to be unaffordable based on the required loan amount.

It also found that the average maximum loan offered to self-employed mortgage applicants is £221,400 – a decrease of 3% from the last peak in August 2020.

Mortgage Solutions said that in a survey it was revealed that 80% of self-employed in Britain have been rejected when applying for a mortgage, 36.6% of applicants have faced at least one rejected, and 32.8% were rejected because their credit rating was not good enough.

David Baird, mortgage and protections advisor at Aventur Wealth, said: “COVID-19 has had a huge impact on self-employed mortgages as we have seen increased discrepancy in the market.

“From one major lender (Santander) restricting all lending for S/E applicants to 60% (In January – now at 75%) to others carrying on as normal it has caused more confusion for the average buyer. Personally, I have not seen a decline in acceptance rates, instead it has caused an increase in time taken on my part in researching the right lender for the right applicant.”

Check out some of the latest mortgage offers here: Best Contractor Mortgage Rates | CMME (cmmemortgages.com)

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