Self-employed fear mortgage rejection, says specialist lender

Four in ten of the UK’s self-employed workers say they have been forced into employed roles in order to obtain mortgage funding, according to research from The Mortgage Lender.

The report shows the pessimistic feeling amongst the nation’s self-employed workers, with over half also saying that they would be turned down for the level of funding they currently have, if their income over the past 12 months was used.

In the survey, the lender polled 1,000 UK self-employed workers who either own, or want to own, their own home, and the results this week show a remarkably downbeat feeling about the chances of securing a mortgage.

30% of people were of the opinion that changes to their finances as a result of the pandemic would hinder their mortgage chances in future, as the feeling remains that the door is being closed to the self-employed in the mortgage market.

“47% said they have been deterred from even applying for a mortgage because of their self-employed status” said TML sales and product director Steve Griffiths. “43% of those aged between 18 to 34, and 36% of those aged 35 to 44 believe their chances of being given a mortgage in the future have been scuppered because of the financial impact of the pandemic.”

Earlier research in July found that 85% of self-employed workers felt their income had not yet returned to pre-pandemic levels, with nearly 40% admitting to reconsidering their future in self-employment as a result.

“While the feeling amongst the industry was that the self-employed had suffered the most financially during the last 18-months, it is a very stark indicator of the feeling amongst the nation’s freelancers and contractors” said Andy McBride, Business Development Director at Professional Contractor Mortgages.

“Perhaps understandably those in this situation have had to reassess how they work in order to make ends meet, and it is a natural reaction to assume that mortgage funding would not be readily available. That, however, is not the case. With an estimated 5 million self-employed workers in the UK, it does not make sense to lenders to alienate these.”

Traditionally, mortgage options for those working as contractors have been more limited than for permanent employees. Now, however, there is a wider availability of lenders who are contractor-friendly than ever before, as McBride explains.

“Regardless of the pandemic, this year has seen huge change in the contractor and freelancer community, with the impact of IR35 meaning many have had to change the way in which they receive their income.”

“Naturally, many assume that mortgage options are also impacted by this change, with the freedom of working through a Limited Company being lost when switching to an Umbrella company.”

“That, however, does not ring true. In most instances, being inside or outside of IR35 has no tangible impact on mortgage options, with more lenders than ever before happy to work with us to lend based on contract rate.”

With a comprehensive range of mortgages available from across the market, now could actually be an ideal time to review your mortgage options, with rates currently at historically low levels. Speak to one of our specialist consultants today.

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