For independent professionals, navigating the mortgage landscape can often feel like charting a course through choppy waters. The outlook for the economy has changed again, with the latest forecast this week being remarkably upbeat, with a revised growth forecast in the right direction. The economy, government housing targets, and their ripple effect on lending criteria all play a significant role. Understanding these currents and steering towards a smooth sailing mortgage journey can prove difficult in the changeable environment.
The Economic Compass: Where Are We Headed?
The UK economy has certainly been on a rollercoaster ride lately, and it is natural for individuals to wonder how that impacts their plans for homeownership. The UK has seen shifts in inflation and interest rates, which directly influence the property market.
While economic growth has been somewhat slow, unemployment remains low, which is a positive sign. The Bank of England has been managing interest rates carefully, and while there have been some fluctuations, the good news is that mortgage rates, though not at the historic lows of a few years ago, are anticipated to settle into a more predictable range. Some experts suggest that a rate of 3.5% could be the "new normal" as market volatility subsides.
Lenders are, of course, always keeping a keen eye on the economic climate. In times of uncertainty, they might become a touch more cautious, which could mean a closer look at affordability or slightly higher deposit requirements. However, it is crucial to remember that even in a fluctuating economy, mortgages are still very much available. It is about finding the right fit for an individual's unique circumstances.
Building for the Future: Government Housing Targets
The government has set ambitious targets to build 1.5 million new homes over the current parliamentary term. Homes England, the government’s housing and regeneration agency, has recently reported exceeding its 2024/2025 targets for new homes started and completed, which is encouraging.
More homes on the market can, in theory, help to ease house price inflation over time, making homeownership more accessible. However, building at this scale is not without its challenges. Planning reforms take time to deliver, and there are still hurdles like skills shortages in the construction industry.
For independent professionals, an increase in housing stock could mean a broader choice of properties, potentially easing some of the competitive pressures seen in recent years. However, the impact on affordability will depend on how effectively these new homes meet various market needs and price points.
Independent Professionals: The Mortgage Outlook
So, what does all this mean for independent professionals? Cleerly understands that proving income can sometimes feel like a puzzle when an individual is self-employed, a contractor, or a limited company director. Lenders typically prefer a steady income, and for the self-employed, this usually means providing at least two to three years of certified accounts or SA302 forms from HMRC.
The good news is that the lending landscape for independent professionals is evolving. Lenders are increasingly understanding of diverse income streams and are developing more flexible criteria. Some are even willing to consider applicants with just one year's accounts if income is stable or increasing. What is more, there is a growing trend for lenders to consider retained profits for limited company directors, which can significantly boost borrowing power.
Independent professionals should not expect to pay higher mortgage rates simply because of their employment status. If they can provide clear proof of income and demonstrate affordability, they should have access to similar rates as employed individuals. However, the key is knowing which lenders are truly "self-employed friendly" and how to present a financial picture in the best possible light.
This is where an independent mortgage broker like Cleerly becomes a valuable resource. Cleerly specialises in understanding the nuances of independent professional finances and has access to a wide range of lenders, including those who offer tailored solutions. Cleerly can help individuals:
- Navigate income assessment: assist in compiling the necessary documentation and presenting income in a way that lenders understand.
- Access specialist products: know which lenders are more flexible with their criteria for independent professionals, including those who consider using the contract, one year's accounts or retained profits.
- Maximise borrowing potential: explore all options to ensure individuals can borrow what they need to achieve their property goals.
The UK economy and housing market are dynamic, but with the right guidance, securing a mortgage as an independent professional is entirely achievable. At Cleerly, the team is dedicated to making the mortgage journey clear, straightforward, and ultimately successful, irrespective of economic headwinds.