11 May 2020

Bankers in receipt of bonuses face fewer mortgage options

Borrowers who rely on bonus payments for much of their income, such as bankers and others working in the financial sector, are finding their lending options much more limited as a result of Covid-19.

With so much uncertainty surrounding the economy, lenders are taking fright at any level of variable income. This means that bonuses may not be taken into account at all, or at least not at the same level as before, because they are not guaranteed. Indeed, some banks have already stated that no bonuses will be paid this year.

This is a significant change of stance within a short period of time and will make life difficult for those who rely on bonuses, whether they are purchasing a new property or remortgaging. Before the crisis, most lenders would take between 50 and 100 per cent of bonuses into account when calculating how much to lend, as long as consistency over three years could be demonstrated. However, Barclays is only considering 25 per cent of bonus payments, down from 50 per cent, while HSBC is no longer considering bonuses at all.

These are pretty draconian measures and could be a real issue for borrowers. It may mean having to find the cash to put down a bigger deposit on a purchase because the size of the mortgage is restricted. While some lenders have not changed their stance on bonuses, they have reduced the maximum loan size or property value they will consider. As a rule, the private banks tend to be more flexible and will lend on a case-by-case basis.

If you are in receipt of bonuses, please get in touch to discuss the mortgage options available to you.

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