Shawbrook’s Home-A-Loan report found that 34% of self-employed people were rejected for a mortgage because their credit scores were not good enough and 30% were denied because their income was too uncertain.
A further 28% said their job was considered too irregular or unsteady by lenders.
This was despite 79% of respondents saying they never missed payments.
The landscape does seem to be improving for the self-employed, however, as the research found that just 24% were rejected for a mortgage, notably down from 45% a year ago.
Shawbrook said this might be a sign of lenders adapting.
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Adjusting goals to buy a home
When asked what was holding them back from buying a home in the next five years, half of the respondents said house prices. Some 46% said general affordability and the cost of living, while 38% said raising a large-enough deposit was a challenge.
Some 28% of people said their self-employed accounts were blocking them from becoming a homeowner.
Shawbrook’s research also explored the ways self-employed people were repositioning their life goals in order to get on the housing ladder.
Some 29% said they rented for longer than they wanted to, 24% cut back on socialising, 14% delayed expanding their business, and 21% put off other life goals.
Steve Griffiths, commercial director for retail mortgages at Shawbrook, said: “Our research clearly highlights the ongoing disconnect between the realities faced by self-employed borrowers and the rigid lending criteria they encounter. While it’s encouraging to see mortgage rejection rates falling, the fact remains that millions of creditworthy self-employed individuals are still being excluded from the property market.
“The self-employed are a vital part of the UK economy, and it’s essential that their unique financial profiles are properly recognised. With brokers having greater clarity on how specialist lenders can offer tailored solutions, particularly when it comes to understanding annual accounts and cash flow for business owners, self-employed borrowers are better able to navigate the mortgage market with confidence.”
