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Self-employed will struggle to get mortgages

Self-employed will struggle to get mortgages

A rise in national insurance contributions (NICs) for the self-employed could have an impact on the mortgage market, commentators have warned.

Chancellor of the exchequer Philip Hammond announced a 2 per cent rise in NICs for the self-employed by 2019 in the spring budget – a measure that is expected to raise an extra £145m a year for the government.

But some market analysts warned the move – a breach of the Conservatives’ manifesto commitments – could affect mortgage lending.

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Alan Cleary, managing director at Wolverhampton-based Precise Mortgages, said: “This attack on the growing self-employed population fails to recognise that self-employed workers do not enjoy the same benefits as the employed, such as sick pay and holiday pay.

“One of the impacts could be that self-employed people may not be able to borrow as much money to buy their home as they will have less net income. 

“Self-employed workers are already at a disadvantage to their employed peers when it comes to mortgages and this latest move does nothing to help.”

Frank Cochran, owner of FSC Investment Services, also in Wolverhampton, agreed the measure could have some effect on lending.

“Anything that is going to take away their income is not a good thing,” he added. “But it might be offset by other measures. Let’s wait and see.”

Mitch Hopkinson, director of Mansfield-based deVere, commented: “It will hit the people for whom it was going to be difficult to get lending in the first place – there are some more loops to jump through. You will have to do more affordability calculations, and with those going up it will affect those calculations.

“A lot of people who have incorporated as a way to help them deal with tax increases will find that it is not going to help as much as they anticipated.”

But Mike Richards, director of London-based Mortgage Concepts Associates, believes the change will have little effect. "It is not that much," he commented. "NIC is fairly small and I don't think lenders will differentiate between employed and self-employed."

Matthew Fleming-Duffy, director of Bournemouth-based Cherry Finance, echoed this sentiment. “I think people are overreacting,” he said. “I can’t see that is going to have a drastic effect. The government have got to get their tax receipts from somewhere.

“I have been self-employed in the past, and being self-employed is tax efficient in many ways – you can offset day-to-day expenses against your profits.”

CPD

Earn 3.5 hours' worth of structured CPD with FTAdviser's course on helping self-employed people onto the housing ladder. Click here or copy and paste the link below

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simon.allin@ft.com