For applicants whose latest accounts date from 2021, Clydesdale no longer requires its Self-Employed Supplementary Form. It also has reduced its requirement for three months of business bank statements to just one.

Many of the self-employed have struggled to secure a mortgage from mainstream lenders, particularly as their incomes can be more complex and their profits may have fluctuated during the pandemic.

However, clients whose latest accounts have a year-end date of 31 December 2020, both the form and three months’ worth of statements would still be needed.

During the pandemic, many lenders adjusted their criteria for the self-employed as they saw more Covid-impacted accounts that showed a drop in profits which had a knock-on effect on traditional affordability measurements.

However, in the latter half of last year, some providers loosened criteria to enable self-employed borrowers to apply for a mortgage.

In the last in a video series of four in association with The Mortgage Lender, Greg Cunnington said: “I have a client I’ve dealt with for ten years. He runs a cool business, he designs restaurants, shops and bars all over the world. He took six months off because there was no work globally and it was costing him money to keep the office open. He’s now back up again, with record numbers coming through in Hong Kong. He thought getting a mortgage would be really easy.”

Cunnington explained the client’s existing lender is a top six provider who won’t take the case ‘in a million years’ due to the work break, despite the fact the client’s a great credit risk.

He added that some mainstream lenders are stepping up for the self-employed including Halifax which was doing a lot of ‘common sense underwriting’ on self-employed cases, also mentioning HSBC and Barclays, but TML’s sales and product director Steve Griffiths outlined the specialist lender’s point of difference.

He said: “The example Greg gave there about the customer who closed up for a bit and had a hole in his recent set of accounts. A limited number of mainstream guys would say yes, that’s not a problem. What that means is, as a specialist lender you want to be number three on the recommendation list who will definitely do the deal. I guess that’s the space we’re moving back into again. When you are looking at Covid-income impacted clients, you’re looking at a very short list of mainstream lenders – maybe just one.”

For more on the debate, watch the video below.

Our video panellists include Steve Griffiths sales and product director, The Mortgage Lender, host and group editor of Mortgage Solutions, Victoria Hartley, Greg Cunnington director lender relationships and new homes at Alexander Hall and Andrew Montlake (pictured), managing director Coreco Mortgage Brokers and chairman of AMI.

Sponsored content in association with The Mortgage Lender.

In association with The Mortgage Lender (TML), Steve Griffiths, sales and product director at TML said no matter what the income, the client’s experience and income consistency were key to getting these cases through.

“I was discussing a case last week at an event with two high-earning applicants with a low loan to value (LTV) but one of the applicants worked in financial services and had a very high reliance on his bonus, so we needed to count 100 per cent of that. The other applicant was a contractor with two separate employers – this is a good example of great customers, struggling with two more complex elements,” said Griffiths.

Both the brokers on the panel, Greg Cunnington, director of lender relationships and new homes at Alexander Hall, and Andrew Montlake, managing director at Coreco Mortgage Brokers, said they were seeing more of these client cases coming through their London-based offices.

Cunnington said: “It’s about understanding the background with these cases. We’re seeing a lot more people with two jobs, like delivery driving, for example. We had a doctor who used to do a three-day week, who has added two days locum shifts.”

He added that the most attractive jobs listed on applications have changed immeasurably too.

“We had a client who got all his income through Instagram. We got a specialist lender to take a look at the advertising contracts and his business banking statements – that was really interesting. In another first-time buyer case, this person had a relatively normal job, but all their income was going out to another person. We had to dig in and it turned out the guy lent his deposit cash every month to a friend, who returned it plus two per cent interest on top which the applicant viewed as a rock-solid income source,” said Cunnington.

The video panellists include Steve Griffiths sales and product director, The Mortgage Lender, chair, group editor of Mortgage Solutions, Victoria Hartley, Greg Cunnington director lender relationships and new homes Alexander Hall and Andrew Montlake, managing director Coreco Mortgage Brokers and chairman of AMI.

See the first and second parts of the TML complex income series here.

Sponsored content in association with The Mortgage Lender.

In a video in association with TML, Griffiths (pictured) said: “Typically, as a specialist lender we allow for some degree of adverse in our entry level products, someone whose missed a few payments on credit card or has some historical adverse credit. But what we decided to do is go down a level and have a straightforward complex income product which starts with a two instead of a three.”

In late November, the lender launched the RL0 product range with rates that start from 2.84 per cent and are available across purchase and remortgage categories up to a maximum loan to value of 85 per cent.

The self-employed products will cater to individuals with complex incomes as their employment status may mean they will struggle to secure a mortgage from mainstream lenders.

Griffiths said the lender was also starting to see more Covid impacted accounts coming through where a dip in profits had a knock on effect into affordability.

“So we look at pre-tax from previous years so typically 2020. All we need to see is has the business returned to a reasonable level of turnover, in line with the previous accounts. As long as we can see they’re on that journey we can almost annualise what their turnover is now and take off the cost ratio from the previous set of accounts,” he added.

According to TML, there are over four million self-employed workers in the UK and that number has been growing in the past year.

Our panelists in the second of our series of four videos on complex self-employed incomes post-Covid due to run before the Christmas break, include Steve Griffiths sales and product director, The Mortgage Lender, Greg Cunnington director lender relationships and new homes Alexander Hall and Andrew Montlake, MD Coreco Mortgage Brokers and chairman of AMI.

Sponsored content, in association with The Mortgage Lender

The RL0 product range rates will start from 2.84 per cent and are available across purchase and remortgage categories up to a maximum loan to value of 85 per cent.

The range will cater to individuals with complex incomes as their employment status may mean they will struggle to secure a mortgage from mainstream lenders.

According to TML, there are over four million self-employed workers in the UK and that number has been growing in the past year.

The lender added that more borrowers are being classed as having complex income, which can include multiple income streams or variable income, but despite this growing it was still challenging to secure a mortgage.

Steve Griffiths, sales and product director at The Mortgage Lender, said: “The self-employed and those with untraditional income streams are becoming more and more common in the UK but the lending industry has failed to adapt as quickly to this trend.

“Our new RL0 product range will offer competitive pricing for borrowers that don’t have adverse credit history but do have complex incomes. We are pleased to be supporting these customers by taking a real life approach to affordability such as using pre-Covid accounts where appropriate, as well as 100 per cent of bonus and overtime for employed borrowers.”

During the pandemic many lenders tightened their criteria around self-employed and complex income to limit riskier borrowing, which led to concerns that borrowers with non-standard financial circumstances would not be offered a mortgage.

According to a report from the Intermediary Mortgage Lenders Association in October, this has started to change. Now most lenders say they would lend to applicants with more complex needs and income.

However, some brokers disagreed with this view, saying that lenders’ approaches towards self-employed borrowers were overly cautious and even at times dysfunctional.

Close to our industry ‘home’ we’ve seen the final throes of the stamp duty holiday – partial in nature for the last few months and ultimately only available in England. It delivered at most a £2,500 saving, which undoubtedly helped some, but would have been a minimal driving force for housing transactions, particularly in the last four to six weeks of it.  

Many have welcomed the return to ‘normality’, and it’s true that we are now getting a much better idea of the medium to longer-term future for the UK housing market because the holiday has fully ended. 

The second deadline to be hit and passed was that of the furlough scheme and this clearly has the potential to have a much more sizeable impact for many more people and businesses, albeit in the context that the numbers on furlough have been dropping consistently for some months.  

At the end of June, there were fewer than two million people on the furlough scheme. Now there are none, but we await to see how many of those individuals will be returning to their old – or new – jobs. 

There will be people who unfortunately do not have a job to go back to, and it’s also clear the pandemic has had an impact on the finances of many people. The good news however is that the worst predictions of what Covid might unleash on the economy appear not to have been met.  

Financial impact on tenants 

Foundation carried out a survey focused on the housing aspirations of both existing homeowners and renters. It was encouraging to learn the vast majority of people had not experienced any negative financial impacts as a result of the pandemic, although self-employed people were three times as likely as employed individuals to have taken out a government grant or business loan. 

And the further good news is that very few people say they have been declined for a mortgage, in-store finance, an unsecured personal loan, or a credit or store card when they applied for them.  

The importance of access to finance and credit can’t be underestimated.  

Lenders want to lend, have the funds to do so, and are actively looking at borrowers who might traditionally have been under-served.  

What we can inform and educate borrowers and potential borrowers more on, is their increased ability to access mortgage finance, even if they have credit issues or are concerned about their finances during or post-pandemic.  

Almost one in four say they’re worried about being approved for a mortgage in the future, citing concerns such as a poor credit history or score and a low or unstable income as the top worries. 

Options are available 

However, the availability of mortgages for those who might not have a clean credit score or have recent credit blips has grown considerably. We should know, as we’ve been offering these mortgages for some time, and there is a flexibility in terms of accepting multiple incomes or other types of income that might not have been there the last time the borrower sought a mortgage.  

Or they simply might not be aware of these product options, if they’ve never secured a mortgage before. 

So, there is clearly a need to keep banging the drum about specialist lending options and what is achievable for all types of borrowers, especially after a period when some borrowers might be worried about the impact on their finances and how this might be perceived by a lender.  

We certainly don’t want prospective customers to think that a mortgage can’t be secured, especially when their product choice has grown considerably. 

This is compared to the 48 per cent who were successful the first time round before the pandemic. 

The survey of 1,000 prospective homeowners found 43 per cent of first-time buyers were rejected for a mortgage more than once. This was up from the 17 per cent who said this was the case in March last year. 

The proportion of new potential buyers who were rejected once stayed stable, with 38 per cent citing so in March this year compared to 36 per cent last year. 

Multiple barriers 

The survey found first-time buyers were being rejected for more than one reason in many cases.  

Two-fifths were turned away due to poor credit history, up from a fifth last year.  

With a lack of high loan to value mortgages on the market until very recently, some 39 per cent had their applications rejected because their deposit was too low. In March last year, this hindered 19 per cent of first-time buyers. 

Those who were self-employed, with irregular incomes or on a contract were rejected for a mortgage in a third of cases while a payday loan blocked 29 per cent of buyers from obtaining their first mortgage. 

A lack of income was the primary reason for rejection for a quarter of respondents. 

The survey also highlighted a surge in lender errors. Some 35 per cent of first-time buyers were rejected because the mortgage provider made an administrative error, compared with the 14 per cent last year.

Resolving credit issues 

Some 28 per cent of prospective first-time buyers said credit history was a concern for them when getting a mortgage, while 39 per cent said they were working on improving their score. 

A fifth said they worried their credit rating had worsened since the pandemic. 

Having an overdraft was a barrier for 34 per cent of first-time buyers when applying for a mortgage and a gap in employment affected 31 per cent of respondents. 

Student loans affected 26 per cent of first-time buyers and 23 per cent were held back by credit card debt. 

Jon Cooper, head of mortgage distribution at Aldermore, encouraged first-time buyers not to worry about being rejected for a mortgage because options have increased over the past decade. 

He said: “The growth of specialist lenders – who with human underwriting dig into the detail of more complicated applications – have opened the door for those with complicated income streams or credit issues in their past to find a pathway to home ownership.  

“The home buying process can be confusing and complicated, especially as this generation of first-time buyer is more diverse in financial circumstances than ever before.”  

He added: “It may feel daunting at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view, and provide options specific to a new buyers’ individual circumstances.” 

The system which is used by over 8,000 advisers found enquiries for products to suit borrowers with a satisfied default rose 40 per cent since February. This indicated that more people who recently paid off arrears were looking for mortgage options during the month. 

Meanwhile, products for those with outstanding missed payments increased 28 per cent. 

People appear to be taking on more jobs to increase their income too. Searches for applicants with a second job jumped 51 per cent, the data showed. 

Additionally, those on a reduced income still required options. While searches for furlough-friendly mortgages fell nine per cent month-on-month, it was the second most sought for criteria in March. 

Clare Beardmore, head of mortgage transformation and operations at Legal & General Mortgage Club, said: “While it is clear that various government incentives are driving many to push ahead with their homeownership plans, the rising number of searches for lenders who will accept applicants with credit impairments and multiple income streams shows that the economic impact of the crisis continues to be felt by many.” 

Bringing together the key people from lenders, distributors and third-party providers for two days, the event aims to promote debate and reflection for how the market will grow and evolve.

Here are the photos of the action.

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The master broker has launched its service with a panel of nine lenders but expects to grow this to around 12 as it is completing due diligence on further additions at the moment.

Crystal managing director Jo Breeden (pictured) told Specialist Lending Solutions that the firm had been handling ad-hoc enquiries for some time, but that these had begun to grow over the last year.

“We are getting more specialist residential enquiries, it’s becoming a new normal,” he said.

“For example there are more borrowers with county court judgments against them (CCJs) and many mainstream residential brokers don’t have a panel for those types of cases.

“We were happy to pick these cases up to support our broker partners, but we never really had dedicated a team for it.”

‘Surprising growth’

Crystal had been receiving around 10 to 12 enquiries per day prior to forming the team with little promotional work, but Breeden is aiming to reach four times that number by the year end.

A dedicated team with an underwriter and two administration support staff have been put in place already, and if the growth targets are reached this is likely to expand to near double figures.

“It’s all about having the right members of staff and we’re increasing our risk and compliance function as well,” Breeden added.

The level of enquiries about later life lending “has been the surprising growth area” for Crystal.

However, Breeden was clear that there were no plans to expand into the equity release market.

“I would never say never, but that’s not our area of expertise and there are plenty of people who do have that expertise,” he said.

Lender panel

Panel lenders have been sourced from existing partners and new arrangements.

They include Foundation Home Loans, Masthaven, Pepper Money, Precise Mortgages, The Mortgage Lender and Together, with new additions Family Building Society, Market Harborough Building Society and Tipton & Coseley Building Society.

“We do have more lenders coming on board, we’re just finalising the due diligence on those,” Breeden continued.

“We see 12 being the number we want to get to and in that mix every lender to add something different.”

Crystal will continue to support its bridging, commercial, development finance, second charge loans and fee arrangements will follow the firm’s standard approach.