According to research from Aldermore, which surveyed 1,000 self-employed adults in May, just under a third thought that mortgage lenders fully understood their earning capabilities when they applied for a mortgage.
Around 50 per cent said they thought their lender only partially understood, with 21 per cent saying that their mortgage lender did not understand their earning capability at all.
Just under a third of those surveyed also said that the main reason they were rejected was because they were self-employed.
The research also showed that factors such as increased difficulty in saving for a deposit and credit scores deteriorating due to the pandemic also had a negative impact on their attractiveness to lenders.
This has led the majority, around 64 per cent, to believe that the self-employed are treated worse by lenders than those with a salary, and over a third stated that buying a home feels out of reach right now.
However, some were more determined to buy a home than ever, with 20 per cent of those surveyed saying they were motivated to buy due to their lockdown experience and over a quarter saying they were actively saving for a deposit.
Aldermore’s head of mortgage distribution Jon Cooper said: “The UK is an entrepreneurial nation, and the growing self-employed workforce is integral to our economy, so it is disappointing to see persistent barriers for them when seeking to secure a mortgage, which appears to have been exacerbated by the pandemic. “
He said that self-employed borrowers should not despair as there were an increased number of specialist lenders who were more adept at understanding complicated income streams, therefore allowing self-employed borrowers more options to get on the property ladder.
Confidence in specialism
This was echoed by Pepper Money’s sales director Paul Adams, who said: “It’s disappointing that so many self-employed people have such little confidence about their prospects of getting a mortgage that accurately reflects their earnings, but we can use this as an opportunity to educate people about the importance of professional advice.
“Specialist lenders, like Pepper Money, are well-equipped to individually assess self-employed income and that means they can often establish a truer picture of their affordability. For brokers, it’s important to have access to a good range of different lenders as this will give them the best chance of identifying the right solution for their customers.”
Poole Family Financial’s director Matthew Poole said that the figures were not surprising as there is an “assumption” from self-employed borrowers that it would be more difficult to secure a mortgage.
“As long as you are completing your tax returns accurately and on time, which shows a true reflection of your earnings then there is no reason the self-employed shouldn’t access mortgages as easily as the employed population,” he explained.
He said that a “tricky” aspect with self-employed borrowers was that there was variation between lenders on how they assess income, which can create some confusion, but therefore using an adviser is vital.
From a criteria perspective Poole said that most lenders wanted to see the latest three months of trading to make sure trading was in line with or higher than pre-Covid-19 trading, and most used filed tax returns which could negatively impact some clients.
Poole concluded: “From a lender perspective it’s hard for them to do anything differently really as criteria can change at any time so they wouldn’t want to promote this too much, as what is correct today could be completely different tomorrow.”
Mansfield Building Society’s head of mortgage sales Andy Alvarez said: “If you look at it from a self-employed perspective it is no secret that it is harder to get a mortgage than it was 18 months ago and that is down to the way some lenders view government support and how they view change in income as well.”
He said that there was still appetite for self-employed mortgages, and that it would take one or two lenders to widen their criteria and then lenders would start “trickling through” and writing more business.
