The mortgage industry needs to align its expectations with modern living to help the self-employed and stop equating security with a PAYE income, according to The Mortgage Broker.
Self employment is in the rise in the UK, up from 3.8 million in 2008 to 4.6 million in 2015. This figure is swiftly catching up with the number of those in the private sector, as the age of those in part-time and full-time self-employed work rises and the percentage of those self-employed in the finance and business sector has also seen growth. Overall, 16 per cent of the UK workforce is now self-employed.
However, despite this, research from Nottingham Building Society has found that nearly one in eight self-employed workers have been rejected for mortgages since opting to work for themselves, despite their finances being in better shape than when in a standard job.
The research also revealed that 12 per cent of self employed workers have been turned down for a either a first time mortgage or remortgage due to issues with proving income and affordability when not a full-time employee. Nearly 20 per cent of landlords have their own business, with a third salaried. However, financing issues continue to pervade the sector.
Managing Director of The Mortgage Broker Ltd, Darren Pescod, commented: ‘Historically, the self-employed landlords have been a fairly marginal group and many lenders could safely ignore them. However, the rise of the ‘gig economy’ – people having temporary jobs, or doing separate pieces of work, each paid separately, rather than working for employers – is growing fast and will lead to changes in mortgage lending and the economy overall. Thankfully, we now have access to mortgage lenders that are looking at the self-employed a bit more leniently, with some lenders considering criteria of only needing one year’s accounts where previously three years’ accounts was the minimum required.’