Self-employed workers in the UK are struggling to be approved for mortgages since working for themselves, despite earning more than in their previous full-time employed position, according to new research.
Nearly one in eight self-employed customers have been rejected for mortgages, whilst 12% of self-employed workers have been turned down for first-time mortgages or re-mortgages, underling the problems of proving income and affordability for customers who are not full-time employees.
The findings come from new research for the Nottingham Building Society (The Nottingham), which highlights how it is not down to having a lower income, as nearly half (48%) of the self-employed workers questioned earned about the same or more than in their previous job.
Around 26% said they were earning more and the overwhelming majority had previously been in full-time employment.
The Financial Conduct Authority’s Responsible Lending Review into the workings of the mortgage market in May concluded there was no evidence that mortgage companies were being prevented from lending to self-employed borrowers by new affordability rules and that the volume of loans had not fallen.
Ian Gibbons, senior mortgage broking manager at Nottingham Mortgage Services said: “Self-employment is growing rapidly and being your own boss should not mean you cannot successfully apply for a mortgage.
“Our study shows self-employment can still be an issue when applying for a mortgage with nearly one in eight being turned down despite many earning more than they were in full-time employment.
“Lenders are responding with new mortgage deals for self-employed customers being launched regularly so there are options available and demand. The key to ensuring that you do not struggle to be accepted is to get expert independent help and to explore the full range of options.”
Mortgage brokers believe lenders need to do more to support the self-employed, and research by Pollright found 86% of brokers say there should be more mortgage choice for the self-employed.
Nearly a quarter (23%) of mortgage brokers expect applications from the self-employed to rise this year and around 33% saw a rise in self-employed mortgage applications last year.
The number of self-employed people in the UK is rising, according to the latest Government data. Around 4.69 million currently work for themselves after an increase of 182,000 in the three months to March.
Nottingham’s research shows it’s not only mortgage lenders who turn down self-employed customers, as around 14% of recently self-employed people have been rejected for credit cards and 10% for unsecured loans.