A significant portion of the UK’s self-employed population is not betting on securing a mortgage from a high street lender anytime soon.
More than a third (37 per cent) of UK renters who work for themselves believe they will never be able to purchase a home, according to research conducted by Aldermore Bank.
Office of National Statistics (ONS) data suggests there were around 5m self-employed workers in the UK in the fourth quarter of 2019, up from 3.2m in 2000.
As it stands, this figure would mean at least 1.9m people believe lenders will not give them a mortgage. For some, it is already a reality.
Last week, a BBC report brought to light the inaccessible affordability criteria high street lenders have put in place for those who are self-employed and have taken out a Self-Employment Income Support Scheme (SEISS) since the beginning of the pandemic.
Metro Bank has told customers who have taken out an SEISS grant they need a deposit of 20 per cent or more. Whilst Santander requires a deposit of at least 25 per cent for those who are self-employed - regardless of whether they’ve taken out a government scheme, according to the report.
At NatWest and the Royal Bank of Scotland, SEISS grant holders are seeing their mortgage applications refused point blank.
“Most lenders and banks require two or three years of accounts as part of their affordability assessment [for self-employed workers] which can be prohibitive,” Alex Winn, a mortgage adviser at Habito, told FTAdviser.
“Lenders have varying opinions on how to treat applicants who have taken government support or grants during the Covid-19 pandemic.
“Some want to see business levels over the last three months returning to previously declared and earned levels - which for some is taking time as the economy recovers.
“Many self-employed applicants including sole traders, freelancers and entrepreneurs have had a very challenging time over the past 18 months.”
Aldermore’s research, which surveyed 1,000 self-employed adults in May 2021, also suggested more than one in ten (13 per cent) were reconsidering their employment status entirely just to improve their chances of getting on the housing ladder.
But John Penberthy-Smith, chief commercial officer at Saffron Building Society, highlighted the need for the UK’s self-employed to look beyond high street lenders for their mortgage.
“Whilst it is true that many high street banks and larger lenders have tightened their application process for self-employed and furloughed applicants, that is not true of all lenders.
“We have seen consistent applications with our case-by-case, common sense approach. Working closely with brokers, we have accepted many self-employed, contractor and furloughed employees.”
Specialist lenders like Saffron BS and Aldermore are advising borrowers in this bracket to approach brokers with more diverse lender networks.
Steve Seal, managing director at fellow specialist lender Bluestone Mortgages, said: "In our conversations with brokers, it is apparent that many would-be borrowers who don’t meet the traditional criteria of mainstream lenders have the means to make their mortgage repayments and we would urge the market to think more holistically.”