According to research from IPSE and CMME, 38 per cent of freelancers reported that they were a homeowner and had a mortgage, with men and limited company director more likely to own a home with a mortgage compared to women and sole traders.
Freelancers aged 40 and over were more likely to own property at 41 per cent compared 10 per cent of freelancers aged under 40.
Income was also a big factor, with freelancers charging over £600 a day more likely to own a property with a mortgage at 56 per cent compared to 38 per cent of those who charged under that amount.
The report added that 10 per cent of freelancers were looking to buy in the next year, and 12 per cent said they planned to buy in the next one to five years.
Around 22 per cent of sole traders said they planned to buy in the next one to five years, compared to five per cent of those operating through a limited company.
Female freelancers were more likely to plan to buy in the next one to five years at 21 per cent, which is more than double their male counterparts at nine per cent.
Just under a fifth of respondents bought a property in the last 12 months, which the report said was likely to be due to “rising inflationary pressures and an overall downturn in the mortgage market”.
Interest rate rises a major concern
Around 37 per cent of those that have a mortgage reported that their fixed rate ended before 2024 and 41 per cent said their fixed rate ended after 2024.
Another 20 per cent said that they were not on a fixed rate mortgage deal.
The report said that 84 per cent of those on fixed rate mortgages were somewhat or very concerned about the impact of rising interest rates when thinking of their fixed rate period coming to an end.
Almost half said they were very concerned about the impact of rising interest rates, and two-thirds of freelancers without a fixed rate mortgage were somewhat or very concerned about the impact of rising interest rates on their upcoming financial decisions.
The reports noted that: “Overall, it is evident that rising interest rates are significantly impacting freelancers’ upcoming financial decisions. In particular, it represents a major concern for many of those approaching the end of their fixed-rate mortgage.
“As a result, both industry and government should seek to provide more support, advice and options to those worried about higher mortgage premiums.”
Inflation impact
Around 77 per cent of those on fixed rate mortgage were worried about inflation and its impact on mortgage pricing when their deal matured. This falls to 60 per cent for freelancers without a fixed-rate mortgage.
Approximately 85 per cent of those on fixed rate mortgage were somewhat or very concerned about the cost of living crisis and the conclusion of their fixed rate period.
The report said this was likely due to expected higher mortgage premiums, rising household costs and real-term pay falls.
More than half, 59 percent, of freelancers with a fixed rate mortgage were also worried about the housing market when their deal came to an end.
Around 55 per cent were also worried about the volatility of the mortgage market when it came to future financial decisions and 63 per cent were concerned about rising house prices.
Nearly quarter found mortgage process difficult
Over half, 55 per cent, of freelancers who were self-employed when they secured a mortgage found the process somewhat or very easy, which aligns with 2021 figures of 56 per cent.
However, 23 per cent said they found the process somewhat or very difficult. The most popular reasons was providing additional paperwork because of their self-employed status, lenders not considering applicants because of self-employed status and being penalised for being self-employed.
Around 10 per cent said that they were unable to find a broker that understood their situation and 16 per cent said that the process was confusing.
Nearly a quarter said that lenders were not willing to lend the amount needed and 11 per cent said that they lacked support from their lender or broker.
More than half, 56 per cent, of those who planned to buy in the next one ot five years said that there were somewhat or very concerns about their chances of securing a mortgage.
The issue of affordability
For those not planning to get a mortgage in the next five years, the top reasons came to not being able to afford anything in the area they live at half, concerns about financial uncertainty and having used up all savings during the cost of living crisis at 42 per cent apiece.
Over half, 54 per cent, said that they understood the step to obtain a mortgage but around a third said that they did not.
Around 43 per cent of those planning to buy in the next five years worried they may not be able to afford it, with over half citing job security as a concern.
Nearly half of those buying in the next five years were worried that they would be treated unfairly by lenders, and a third were concerned their credit rating wasn’t good enough to get a mortgage.
Around 39 per cent wanted further support on finding cheaper mortgage deals and 38 per cent wanted support around what to take into account when considering a mortgage deal.
This was followed by 37 per cent who wanted to know what to consider when sourcing a mortgage as a self-employed person.
Government and industry need to ‘explore tailored product’
The report called on the government and the mortgage industry to “work together to explore tailored products and ways of making it easier for the self-employed to successfully apply for mortgages”.
It noted that mortgage products for the self-employed need to reflect the “flexibility that is required with the finances of the self-employed”, such as being able to cover unexpected business costs and accounting for fluctuating incomes.
The report continued that mortgage lenders should ensure that their advisers are fully trained to understand the self-employment sector and their financial situations.
“Both government and the mortgage industry need to provide clear advice, support and options for those concerned about the conclusion of their fixed-term mortgage period,” it concluded.
