More than a third of borrowers believe they can’t get a mortgage if self-employed

More than a third of borrowers believe they can’t get a mortgage if self-employed


A survey by Shawbrook Bank, of more than 2,000 people, found that 35 per cent of those surveyed thought they couldn’t get a mortgage if they were self-employed.

Within that group, 23 per cent were unsure they would be able to secure a mortgage if they were self-employed, with 12 per cent getting the answer incorrect.

John Charcol’s product technical manager Nick Morrey said that whilst the perception may be that self-employed mortgages may be hard to come by that was not necessarily the reality.

“They will be able to get a mortgage but maybe not at the amount they want,” he explained.

This was echoed by Chapelgate Private Finance’s associate director Colin Payne. He added: “Perception and reality can be different things. We have not had a huge amount of self-employed cases…so that could fuel perceptions that they [self-employed mortgages] are hard to get.”

He added: “Self-employed borrowers might not get the most competitive deal because they may not be eligible with a high street lender but there are solutions.”

Payne noted that the ultra-low interest rate environment may also have skewed self-employed views.

He said: “In the era of ultra-low interest rates we have a generation that thinks this is the norm to pick an interest rate of 1.5 per cent. When you quote 2.5 to 3 per cent they think it is really expensive But in reality you’re going back to normal rates that would have been exceptional.”


Lending attitudes

Brokers also noted that lenders were being more cautious when it came to self-employed mortgages but business was still being written.

Payne continued: “We might have struggled with one or two but for the most part we have been successful. Most lenders are cautious, there is no doubt about that. But I think if you present a case in the right light, do the right digging into the business and how its performing and how it was affected by the pandemic most lenders are looking to help.”

Morrey added that as most high street banks would ask for two-years’ accounts and then use the average profit over the past two years it could be challenging for self-employed clients to secure mortgages, particularly for borrowers working sectors worst hit by the pandemic.

“[Self-employed borrowers] don’t use advisers as much as they should, so they get disappointed after the first two or three responses from banks,” Morrey said.

Morrey added that this could be “disheartening” for self-employed clients who are looking on their own. They may feel “underserved” by lenders.

Habito’s mortgage broker team lead Alex Winn said: “We’ve not seen a big shift in the levels of demand for self-employed mortgages just yet. Most lenders need two years’ accounts so even if it is the case that people during the pandemic created new businesses and shifted to self-employed income, we might not see that shift be reflected in the number of mortgages being approved for a couple of years as people wait to be eligible.”

He added that lenders would be wary of heavily-impacted sectors such as hospitality and travel sector, although this could change following the economy’s full reopening on 19 July.

Attitudes to government support and grants also remained mixed.