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More lenders limit mortgage deals for the self-employed

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Written by: Lana Clements and Owain Thomas
26/11/2020
Santander and TSB are the latest lenders to enact stricter rules for self-employed mortgage applicants.

TSB has reduced the maximum loan to income (LTI) and loan-to-values (LTV) for self-employed borrowers.

Applicants working for themselves will only qualify for a maximum LTV of 75%, while the LTI has also been cut to 4.25

By comparison, employed applicants can qualify for 85% LTV and an LTI of 4.49, where the total income is more than £40,000.

A TSB spokesperson said: “These are temporary changes to ensure our mortgages are in line with market conditions and so we’re able manage our service levels to support the demand from our customers.”

Meanwhile, Santander has tightened self-employed income evidence demands and now requires explanations of how businesses have survived Covid-19 lockdowns.

The move impacts all new residential self-employed mortgage applications and the lender told brokers it may also be in touch on cases which have already been submitted but not yet agreed.

In addition to existing evidence requirements, Santander is now asking for three months’ business bank statements where the borrower’s income or business has been affected by Covid-19.

The most recent bank statement must not be more than 30 days before the date of the application.

Where the applicant’s income or business has been unaffected by Covid-19, advisers must explain why they have not been affected or how they have changed the way they operate.

They must also provide confirmation the business can continue to trade under any current or future lockdown restrictions in a way that allows the income declared on the application form to be sustainable.

Affected businesses

Where income or business has been affected by coronavirus, alongside the three months’ business bank statements, other questions must also be answered.

They are:

  • Was the business unable to trade during Covid restrictions and if so for how long?
  • What impact the previous Covid restrictions have had on the business turnover and customer income?
  • Was any government assistance applied for? If so, details are needed.
  • What impact any current or future lockdown restrictions will have on the business and how this will affect the turnover and income.
  • Explain how the business bank statements support the income declared for affordability on the application form.

Santander head of sales, Helen Harrison said: “Santander remains committed, as a responsible lender, to supporting self-employed customers applying for a mortgage up to 85% LTV.

“The recent changes to our evidence requirements will help us to continue to work with customers to fully understand any recent impacts on their business and ensure that any borrowing remains affordable.”

The move by Santander and TSB Come after NatWest earlier this week placed fresh limits on borrowers working for themselves. And last month, Nationwide implemented lower LTVs for the self-employed.

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