A report by online mortgage broker Trussle has found almost three quarters (71 per cent) of self-employed borrowers believe it’s harder to get a mortgage due to their employment status.
The broker’s Mortgage Saver Review report says a fifth (18 per cent) of self-employed borrowers aged 25 to 34 are putting off having children to help their application.
According to the Office for National Statistics, there are about 4.85m self-employed people in the UK, with the number predicted to rise to 5.5m by 2022.
Trussle says self-employed people typically have to jump through extra hoops to get onto the property ladder to prove they’re not a risk to mortgage lenders. These may include providing additional documents including tax year overviews, and two or three years’ worth of accounts.
Self-employed applicants also have their affordability assessed on the past two or three years of earnings, rather than their current income.
A third (33 per cent) of self-employed borrowers found sourcing this information particularly challenging. As a result, many self-employed people face longer application and approval times and additional costs to source documentation needed for their mortgage.
The Mortgage Saver Review also found pregnant self-employed borrowers believe they were treated different during their mortgage application process. One-in-five (20 per cent) of this group felt a lender unreasonably asked for proof about when their maternity leave ends. A further 20 per cent felt penalised for not giving an exact date for returning to full-time to work.
In comparison, permanently employed mortgage applicants simply need to verbally confirm to the lender that they’ll return to work on the same terms.
Trussle is calling for a collaborative effort from the industry and the government to better support the self-employed. Suggestions include integrating Open Banking to help those with multiple income streams, becoming more flexible with tax reporting periods, and assessing self-employed mortgage applicants on their current, not historic, income.
Trussle chief executive officer and founder Ishaan Malhi says: “The self-employment sector is growing quickly, but the industry isn’t adapting fast enough. Every year, self-employed borrowers face an inconsistent, complicated and time-consuming mortgage journey.
“I’ve experienced the hurdles that self-employed people face first-hand. Before I founded Trussle, I was itching to get on the property ladder. As a self-employed mortgage applicant, I was treated differently by lenders due to my employment status. I wasted hundreds of pounds between various brokers who eventually shut the door in my face. I ended up out of pocket, confused and without a mortgage.”
HomeOwners Alliance chief executive, Paula Higgins says: “The mortgage industry and government need to wake up to the world in 2019 and do more to support the self-employed into homeownership. Gone are the days for many where you have a job for life with one company. Many of the hurdles this group of people face are time-consuming, bureaucratic and unfair.”