Mortgage discrimination a concern for self-employed

Mortgage discrimination a concern for self-employed

Almost three-quarters of self-employed would-be borrowers feel discriminated against by mortgage lenders, a new report has suggested.

Figures released by The Mortgage Lender today (November 28) showed 71 per cent of the self-employed felt they were unfairly treated by lenders and 20 per cent believed they would be refused a mortgage because of their self-employed status.

The research was part of the lender’s ‘The self-employed economy; an opportunity for brokers and lenders’ report, which surveyed 500 sole traders, contractors, and those running a business with up to nine employees.

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The report found of the self-employed borrowers who had applied for a mortgage, 45 per cent struggled to provide the information required by the lender as part of their application.

The research identified a growing dissatisfaction with the self-employed application process, with 63 per cent of respondents agreeing mortgage lenders had a responsibility to provide better support to the demographic.

Peter Beaumont, deputy chief executive at The Mortgage Lender, said he considers the growth in self-employment since the financial crash to be one of the defining characteristics of the UK’s recovery.

He said: "It’s time the mortgage industry woke up to the fact the world is changing.

"For such a large segment of the homeowning population to feel they will be discriminated against when they apply for a mortgage is shocking and unfair.

"As a sector we’ve quite happily lent to married employed people when statistics show at least half of those couples are going to split up."

Mr Beaumont said it was important lenders recognised the reality that self-employed people are creating employment opportunities at a time when many large employers struggle to "sustain their levels of employment".

He said: "It’s something that we at The Mortgage Lender have recognised, people are moving from employed careers to self-employment or they get divorced and that is real life now – that’s why we’re the real life lender, we recognise life doesn’t move in a straight line."

Daniel Bailey, principal at Middleton Finance, said he has on several occasions seen self-employed clients who did not realise the ramifications of their employment status when getting a mortgage.

He said: "Especially where borrowers have previously been able to produce a few payslips as an employee, when they move to self-employed they may feel the process is not favourable to get a mortgage - ultimately most lenders will want to see two years of self-employed accounts.

"I can see an imbalance from the borrower’s point of view, but equally lenders need to ensure proof of income.

"For those considering moving from employed to self-employed, they do need to plan and speak with an accountant and broker - avoid rash decisions as it can have a significant impact on their life."