Self-employed buyers ‘missing in action from market’, says mortgage firm
The Mortgage Lender says many self-employed people don't apply for mortgages, often assuming they'll be rejected.
Self-employed workers aren’t applying for a mortgage because they believe they will be rejected, new analysis shows.
In fact, 34% of self-employed individuals have never applied for a mortgage, according to research from The Mortgage Lender (TML).
The research found that 30% said they’ve never applied for one because they didn’t think they would be approved.
Volatile incomes
Around 38% of self-employed people said their mortgage application was rejected because their income was too volatile.
While 28% said the lender calculated they wouldn’t be able to make the repayments.
Just over a third, 36%, said it’s because they had not built up their deposit yet, and 15% said their business was less than two years old and they were unable to prove their income.
Success rates
While 57% of self-employed people have applied for a mortgage and been successful, 15% of this group said they were not successful on their first attempt. A further, 4% revealed they applied in the past and have not yet been successful.
Around a quarter, 27%, said they did not have the necessary documentation to prove their income,
Affordability assessments
Self-employed applicants are often treated with stricter affordability assessments to those who are employed, mainly because they are considered to have more irregular or complex incomes and are therefore viewed as a greater risk to lenders.
Steve Griffiths, CCO at TML, says: “Self-employed work is becoming an increasingly popular route, with around 4.24 million people reporting to be self-employed in July 2023, however it’s clear that some lenders, particularly on the high street, haven’t necessarily caught up with this trend and aren’t always equipped to deal with more complex incomes.”
