Research from Pepper Money found that 300,000 self-employed adults expect to be in a financial position to buy a home within the next three years, but three-quarters believe that their employment status will make it harder.
Paul Adams (pictured), sales director at Pepper Money, said “aspiration isn’t the problem” for these customers who want to buy a home.
Adams continued: “Self-employed customers are often financially resilient, but their income can be harder to assess through standard lending models. That’s where specialist lenders and brokers play a vital role, helping to build a clearer picture of affordability and opening access to homeownership in financially sustainable and responsible ways.
“As the workforce continues to change and financial lives become more varied, it’s important the mortgage market keeps pace to reflect that reality.”
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Persistent barriers
The Pepper Money survey of 4,000 people revealed that 76% of self-employed adults believe their employment status makes it harder to secure a mortgage, underlining the ongoing challenge of aligning non-traditional income with standard lending criteria.
Concerns about existing debt are also shaping confidence. Among those who became self-employed in the last three years, 81% said they’re worried their current level of debt could affect their chances of securing a mortgage.
A changing workforce reshaping borrowing needs
Many mortgage experts believe that there needs to be a more holistic view of self-employed borrowers in the mortgage industry. Increasing numbers of adults are now earning through self-employment, contracting or multiple income streams, and this reflects a long-term structural shift in how people work and manage their finances.
However, mortgage processes haven’t always kept pace. Many self-employed borrowers still find it difficult to evidence income in a way that fits traditional underwriting models, even where they are financially stable and able to meet repayments. This is creating a growing group of customers who are financially capable but under-served by high street lending criteria.
Without a regular payslip, demonstrating consistent earnings can be difficult, even where underlying finances are solid, Adams said.
For those who also carry adverse credit, the barriers compound further, he noted. High street lenders are typically unwilling to look beyond the credit file to assess the full picture.
A recent study from Atom Bank recommended that those with impaired credit should be treated with more flexibility when it came to borrowing.
The Pepper Money study showed similar issues. This year’s study found that 30% of UK adults, equivalent to 16.6 million people, have experienced adverse credit at some point in their lives, up from 15.3 million the previous year and the highest figure since the study began. Economic pressures continue to push more people toward missed payments and debt.
The study reinforces the role of specialist lenders and brokers in supporting self-employed borrowers by taking a more flexible and holistic view of income and affordability, Adams said.
Pepper Money’s specialist criteria allow some flexibility for the self-employed. The lender can accept applications from individuals with just one year of trading history, compared to the two or three years typically required by mainstream banks. For those trading for two or more years, Pepper Money can use the latest year’s figures for affordability calculations instead of an average of the last three years. This is particularly beneficial for businesses that have recently grown. Affordability can be calculated based on retained net profit within a limited company, not just salary and dividends that have been paid out.
Education gap compounds the issue
The Pepper Money study also highlighted knowledge gaps among those trying to buy a home, particularly among the self-employed. More than a third (36%) of all self-employed adults said they didn’t know what size deposit they would need to purchase a property, highlighting a significant advice gap at an early stage of the journey.
