Alan Cleary - Managing Director of Precise Mortgages
It seems like there’s hardly a month that goes by now when we’re not told about a fancy new term to describe a certain demographic of people. In recent times, we’ve been introduced to the ‘squeezed middle’, the ‘millennials’, the ‘JAMS’ (Just About Managing) and ‘Generation Z’.
The latest group I’ve read about are the ‘slashies’ – self-employed people who are working two or more jobs, for example as a web designer/taxi driver, to make their living. According to a study by the Association of Independent Professionals and the Self-Employed, there are now more than 320,000 ‘slashies’ (I’ve also seen them described as having ‘portfolio careers’ or ‘multi-hyphenate careers’) in the UK.
Although it’s easy to be dismissive when you read about these new terms, I think this new emerging demographic of workers highlights a really important point – the make-up of the UK’s workforce is changing and the way they’re working is changing.
The latest government figures show there are now 4.83 million self-employed people in the UK, working in a huge variety of different fields – from professional landlords to tradespeople, taxi drivers to freelancers.
Technological advances have encouraged many people to take the plunge – all you need is a smartphone or laptop and a good Wi-Fi connection and you can work from almost anywhere. People now have access to all sorts of new opportunities that simply didn’t exist 10 years ago, giving them the freedom and flexibility to be their own boss and make a decent living.
But while the UK’s self-employed sector continues to go from strength to strength, many lenders still seem to be lagging behind when it comes to approving new applications, meaning these workers can still struggle to secure the mortgage they need.
The Mortgage Market Review (MMR) in 2014 saw the introduction of new rules to ensure borrowers are only accepted for mortgages they can afford. All prospective borrowers must now prove their income, so the difficulty people who work for themselves have is providing that evidence as their income can fluctuate from month to month.
Many lenders require more proof of employment from self-employed people than they do from employees, the most common difference being a two- to three-year history compared to just 12 months for salaried employees. As many lenders perceive their financial situation as being too complex or their income as too irregular, it means there are a growing number of potential borrowers unable to access the mortgage they need, as well as an increase in brokers struggling to place their customers’ cases.
Fortunately, specialist lenders, such as Precise Mortgages, understand the challenges and complexities of these cases and can provide solutions to customers who fall outside of mainstream lenders’ criteria. Since MMR came into force, specialist lenders have been in the vanguard of ensuring self-employed workers can still access mortgages. Specialist lenders have experience of reading financial accounts and SA302 statements, and have the risk management processes and skilled underwriters in place to ensure a good outcome for the borrower, broker and lender.
So if you’re approached by one of the UK’s 4.83 million self-employed customers and they’re struggling to get the mortgage or loan they want with a mainstream lender, it’s worth knowing that there are other lenders out there who can help. With the self-employed market worth an estimated £275 billion to the UK economy each year, it’s vital that their growing numbers are catered for, both now and in the future.