One-in-eight self-employed borrowers turned down for a mortgage
Posted 12 October 2016 by Nick Parkhouse
The most recent official data has revealed a sharp increase in the number of self-employed people in the UK. Government statistics show that around 4.7million people currently work for themselves; an increase of 182,000 in the three months to March.
Now, research has found that despite making up around one in seven of the workforce, self-employed borrowers are finding it hard to get a mortgage. A new survey by a leading mutual has found that one in eight self-employed borrowers have been rejected for mortgages or remortgages.
The study by the Nottingham Building Society has found that 12% of self-employed workers have been turned down for first-time mortgages or remortgages, despite 26% of those surveyed saying they were earning more now than they were when in full-time employment.
The research also revealed that it is not only mortgage lenders who are turning down self-employed customers. Around 14% of recently self-employed people have been rejected for credit cards and 10% for unsecured loans.
The study by the leading mutual found that self-employed people were not being declined because of a lower income. Almost half (48%) of those questioned earned about the same or more than in their previous job while around 26% say they are earning more. The overwhelming majority had previously been in full-time employment.
Despite the study, a Responsible Lending Review by the Financial Conduct Authority which looked into the workings of the mortgage market in May concluded there was no evidence that mortgage companies were being prevented from lending to self-employed borrowers by the recently introduced new affordability rules.
More needs to be done to support self-employed applicants
Despite one in eight self-employed borrowers bring rejected for a home loan, Nottingham Mortgage Services senior mortgage broking manager Ian Gibbons says that new products for self-employed applicants are being brought to the market: “Lenders are responding with new deals for self-employed customers being launched regularly so there are options available and demand. The key to ensuring that you do not struggle to be accepted is to get expert independent help and to explore the full range of options."
If you are self-employed and looking for a new mortgage it could pay to speak to a professional broker. With lenders offering different criteria to self-employed applicants - for example some lenders will consider an application without three full year's accounts - a broker can help you find the right lender for your needs.
However, brokers also believe that more needs to be done to help people who work for themselves. Research among brokers has found that 86% think that there should be more choice for the self-employed and nearly a quarter (23%) expect applications from the self-employed to rise this year.
Around a third of brokers saw a rise in self-employed mortgage applications in 2015.