In a poll of Mortgage Solutions readers, more than 60% of respondents pointed to a lack of flexible products as the biggest problem for the self-employed market. By comparison, just 13% said that there is an issue with the number of lenders actively lending to self-employed borrowers.
Increasing numbers of Brits are choosing to work for themselves. There are now 4.77 million self-employed people in the UK, with an increase of 133,000 over the last quarter.
However, mortgage lenders have come in for criticism in the past for taking an inflexible approach to the self-employed who are looking to take out a mortgage.
Chris Lloyd, associate director at Enness Private Clients, pointed out that most high street lenders are very risk averse, and will only lend against the money the self-employed borrower draws from their company, which “can really restrict” the amount they can borrow.
He added: “The lenders that are more helpful for us are the ones that will look at the company’s operating profit as well, and will use that for the income multiple.”
Clydesdale Bank in particular are doing a good job in this respect according to Lloyd, though more lenders should take a similar approach.
David Hollingworth, associate director at L&C, pointed out that there are lots of different types of borrowers within the self-employed subset. Those with several years of records to show will find it easy to meet the criteria employed by mainstream lenders, and so have an equivalent range of options to an employed person.
However, he said that there was room for more lenders to “look to agree cases in a sensible way”, offering an individualised underwriting approach which may mean only looking at one year’s records rather than two or three in some cases.
He continued: “There aren’t huge numbers of lenders ruling out lending to the self-employed, but it’s how they approach that proof of income. If more lenders would consider only looking at a single year’s accounts, it would mean more choice for self-employed borrowers.”
Last week, Aldermore announced that it would now consider applications from borrowers with only a single year’s accounts, as well as considering retained profit within the business when assessing affordability.
Charles Haresnape, Aldermore’s group managing director for mortgages, said there was a growing demand for a tailored approach for self-employed applicants, and noted that one in four Aldermore mortgages come from a self-employed borrower.
Newcastle Intermediaries has also recently adopted a “simplified” approach to self-employed borrowers. Steve Carruthers, head of mortgage distribution at the lender, said: “We appreciate that one size doesn’t fit all and it can be difficult to find a lender that truly understands the needs of self-employed clients. That’s why our policy aims to make the application process much easier.”