The news that self-employed people find it harder to get a mortgage than those with bad credit comes as a surprise.
Apparently just 76% of self-employed applications are approved, far less than those with bad credit (89%).
It doesn’t seem to make sense, given that being self-employed is more of a lifestyle decision than having bad credit, where people are likely to have made a mistake at some stage in their lives by failing to pay their bills.
The Trussle research raises the question of whether lenders are putting too much of a focus on people with bad credit compared to the self-employed, which is a sizable demographic of around 5 million people in the UK.
Indeed, the same study found that self-employed people are frustrated, with 44% accusing the mortgage system of being unfair.
You wonder whether self-employed borrowers are applying too soon after switching from being employed – that could be part of the issue.
A number of lenders require two or three years’ history of being self-employed, as it takes time to be able to calculate how much people earn when it differs from month-to-month.
Self-employed people generally need to jump through more hoops, like getting hold of forms like SA302s and filling out expenditure forms – having an accountant can make this more manageable.
Perhaps we shouldn’t overreact to such research however, especially given that it comes from one brokerage.
From my contact with Trussle, I know the brokerage generally attempts to place cases with the best value lender possible, before moving to another lender – so it may be that many who were turned down were accepted by another lender anyway.
I noticed a lot of cynicism about the research from fellow intermediaries on social media, who suggested they haven’t had the same problems with applications for self-employed people.
Regardless of whether the research is a little overblown however, it’s clearly far more cumbersome for the self-employed to apply for a mortgage.
You wonder whether the industry can come up with a way of making it easier with tech solutions, giving that the self-employed demographic is probably only going to get larger over the next decade.
Ryan Bembridge, Editor, PropertyWire
