More than a third of self-employed workers who have considered applying for a mortgage in the past five years have decided against it, due to the expectation of being turned down, according to a recent survey by specialist lender Together.

Self-employed borrowers, who account for 15 per cent of the UK workforce and the equivalent of 4.8 million people, are judging themselves unworthy, due to concerns of proof of earnings required at high street lenders.

National Landlord Investment Show – MPU

Grounds for caution

Of the potential self-employed homeowners who did apply for a mortgage, 21 per cent were rejected. Furthermore, a fifth of these applicants were turned down more than four times, according to the recent survey from Together.

The main reasons for rejection by high street lenders, cited by one in four self-employed borrowers, were a lack of recent tax returns; irregular or insufficient income and the mortgage amount requested being too large.

Meanwhile, one in five self-employed borrowers in the survey said they were denied a mortgage because they didn’t have enough proof of future earnings.

A growing lack of confidence

As many as 65 per cent of self-employed workers have thought about switching to a traditional job and working directly for one company, due to the challenges they have already faced in trying to secure a mortgage, and the presumption that the application process will be easier if they do.

Impact on the mortgage market

Pete Ball, personal finance CEO at Together, commented: “These findings are understandable, but the fact that so many people are doing themselves out of owning their own home because they expect rejection is very worrying.

“The way people live and work have changed enormously over the past few years, and it doesn’t make sense for the mortgage market effectively to lock out such a large group as the self-employed simply because of the way they earn a living.”

Mr Ball added: “It therefore requires lenders to invest time and develop experience in understanding applicants’ circumstances in order to be able to help them. Providers have, quite rightly, to ensure that mortgages are affordable for borrowers, but that should not be done at the expense of making it harder for the self-employed. There are signs of improvement across the market, but greater flexibility is needed.”

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Jim Kersey
Jim focuses on the socio-economic impact of housing. His reporting for Property Notify often touches on topics such as changes in sentiment among investors in various housing sectors, as well as the impact of various developments on the average person.

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