According to a poll conducted by the forum, 24 per cent of brokers said mortgages for self-employed and contractor clients were the hardest to place, closely followed by clients with adverse credit.
Cherry’s survey also indicated that 18 per cent had problems placing low income clients, and 14 per cent said payday loans were their biggest headache. Other difficult areas highlighted by brokers included non-standard construction and debt consolidation cases. Cherry did not disclose the sample size for its survey.
Donna Hopton, director at Cherryplc.co.uk, said: “We know that the specialist mortgage market is thriving, with competitive solutions for a range of customer circumstances, yet our research shows that brokers can still struggle to place cases for common circumstances like self-employment, contract work and adverse credit.”
One of the main issues for self-employed borrowers is systematic. Lenders will generally work off the last three months of pay slips for those in traditional employment, whereas with a self-employed person they will look at the finalised accounts.
Greg Cunnington, COO at LDNFinance, told Mortgage Solutions that this difficulty for brokers and their self-employed clients is due to the way the lending system is currently set up, but that this is improving, with specialist lenders making life a lot easier.
He said: “With the finalised accounts of a self-employed person you’ll regularly see the impact of the Covid dip, which are reflected on the accounts even when their business is doing great post and pre-Covid. So you end up with a lot of these very successful clients who are haunted by that Covid-instability for a lot longer and find it tricky to get a mortgage.”
How brokers can tackle this
Cunnington said the main issue brokers faced when trying to place self-employed cases was having to filter through differing loan sizes for each lender.
He added: “It needs a lot more work and time, but I think that’s a good thing because these clients really need an intermediary and that extra bit of advice, which is the whole point of being a broker.”
He said this could be addressed through digital means.
Cunnington added: “As brokers, it’s about using the enhanced technology that’s coming through properly so that the vanilla cases don’t touch the sides. This frees up time so you can use your brokerage teams for cases that are more complex and need that extra care from a broker who can handle these cases properly and ensure the client understands how lenders assess their accounts, what they’re looking for, what they can use, and how best to manage their business accounts to fit best with what lenders are after.
“A lot of bigger lenders need two or three years of accounts, which puts a lot of otherwise very successful self-employed borrowers off, but we know which ones only need one year so we can put them in contact with those lenders.”
Paul Stringer, managing director at Norton Home Loans, said: “Often the right solution for an individual is available from one of the smaller specialist lenders and the cherry forum is a good way for brokers to leverage each other’s knowledge and experience across the industry for free to arrive at the best outcome for their client.”
Lenders need to add a human touch
Cunnington said: “Lenders need to grow their capacity to have more human underwriters to perform manual assessments. There are now a growing number of specialist lenders who will do that for self-employed applicants and there’s a high success rate with that approach.
“Some lenders have also improved their criteria recently too. Clydesdale, for example, works on gross profit instead of the finalised accounts, which can help self-employed clients borrow more than they’d otherwise get.”
