Mortgage applications from the self-employed are set to grow by 67% in the next five years, according to Together ’s Residential Property Market Report.
This should bring the number of applications from £20.9bn in 2023 to £34.8bn by 2029.
Changing work and lifestyle patterns mean the sector is likely to continue expanding in the coming years.
However self-employed people are more likely to be rejected for mortgages, investments or loans from high street lenders, due to their fluctuating income levels and difficulties in evidencing all their sources of income.
John Barker, chief executive of personal finance at Together, said: “During economic downturns the tendency of mainstream lenders to reassess their strategies will lead to an environment that is more cautious or risk averse.
“In turn this will always be more favourable to employed borrowers with perfect credit histories over say lending to the self-employed or those with past credit blemishes – even where the latter can put down a larger deposit.
“Bespoke, non-automated underwriting utilised by specialist lenders takes account of such issues and allows a funding decision to be made on a more holistic view of the borrower’s financial circumstances.
“And as more and more people find themselves to be a sole trader, freelancer, side-hustler or majority shareholder a more inclusive approach is required from the Financial Services industry where common-sense is applied to lending with applications judged on merit – looking at the whole picture, not just your credit score or loan-to-income ratio.”
A fifth (22%) of rejected mortgage applicants who would be classed as ‘non-standard’ were rejected because they were self-employed.
Meanwhile a third (29%) a self-employed people think greater flexibility on mortgage repayments, including the ability to overpay or underpay, would improve their mortgage application experience.
