Self-employed suffer from lending squeeze

Self-employed suffer from lending squeeze

Lenders have become increasingly cautious about self-employed applicants, asking for more details and looking to do more manual assessments on mortgage applications.

NatWest, for example, changed the way it assessed self-employed income from May 15 in response to the coronavirus.

Intermediaries are now required to complete a supplementary information sheet when submitting business applications on behalf of self-employed customers.

Supplementary questions include whether the client has experienced a reduction in their self-employed income due to Covid-19 and are in receipt of the government Self-Employed Income Support Scheme.

Piers Mepsted, managing and compliance director at Financial Advice Centre, said the self-employed were the first to come under “increased scrutiny” due to lenders’ concerns about the future of the economy, the impact on property values and the high percentage of borrowers who may be out of work when furlough schemes end.

A survey by The Family Building Society found two-thirds (65 per cent) of brokers in April said providers appeared more cautious, and 55 per cent reported that lenders were asking for more details from self-employed clients.

The survey from FBS also found that almost half (47 per cent) of brokers felt it was harder to place a case. Four in 10 also noticed a fall in demand from self-employed clients.

Kevin Dunn, director at Furnley House, agreed it was more difficult to place cases compared with three months ago. “Lenders want to understand how particularly businesses will have been impacted.”

Mr Dunn added: “There has been an inevitable fall in demand. However, now more than ever, a good independent mortgage adviser will be able to add value to self-employed clients or directors of limited companies.”

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said the measures were understandable, as lenders must “ensure they are lending in a responsible manner.

“This tends to mean some extra documentation requirements, such as business bank statements, are being asked for.”