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Lenders ‘slow to recognise’ surge in self-employed borrowers

  • 25/03/2015
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Lenders ‘slow to recognise’ surge in self-employed borrowers
Some 58% of brokers said they felt confident dealing with their self-employed clients’ accounts, a Mortgage Solutions poll reveals.

Just under half (42%) said they did not feel comfortable dealing with the accounts of sole traders, reinforcing the adage that obtaining a mortgage can be tougher for those not employed by a single company.

Figures published by the Office for National Statistics showed that 4.6 million people were self-employed in 2014, accounting for 15% of those in work, the highest percentage seen in four decades.

Self-employed workers also tended to be older than employees with the number of 65s in self-employment having more than doubled in the five years to 2014 reaching almost half a million.

Your Mortgage Decisions director Dominik Lipnicki explained that since the Mortgage Market Review (MMR) lenders had ramped up their requirements.

“I think that the issues brokers are having is that lenders keep on changing what they need and what they want to look for. If the accounts are a few months old then often lenders will decline so it’s just that much harder to place a mortgage with self-employed clients.

“Lenders have been slow overall in recognising the fact that we have more people who are self-employed, we have more people on temporary contracts,” he added.

“Ultimately mortgage advisers are not accountants so I think it’s right and proper that any mortgage adviser really does get to know what accounts should look like, not just to be able to spot fraud but also to see when things are not quite as the client says they are because people tend to generalise figures and what they earn.”

Mark Harris, chief executive of SPF Private Clients, echoed Lipnicki’s concerns. “Some mortgage brokers may feel uncomfortable handling self-employed clients and their accounts due to the various ways in which different entities, types of income, and so forth are treated.

“Not only that, terminology and the depth of information used in a set of company accounts, if unfamiliar, could be difficult to interpret. A complete set of company accounts includes a director report, P and L [profit and loss] account, balance sheet, notes to the accounts plus for medium/larger firms, cash flow statements, which is a lot of information,” he said.

“As with anything, the more you experience something, the more comfortable and confident you are in doing it.”

Precise Mortgages launched a series of workshops last week to support brokers deal with self-employed clients’ applications.

Director of sales Roger Morris said: “The industry has a duty of care to not only understand what a self-employed customer is, but be able to find solutions. I would think that the majority of brokers, truly, honestly, cannot really understand where the income is on a set of accounts because nobody has ever sat down with them, they just kind of fudge their way through.

“So what Precise does is go and talk to the brokers about all lenders’ self-employed criteria and their niches. So different lender niches, but what we’ll do is what is right by the broker, not a series of adverts for the lenders.”

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