Alan Cleary - Managing Director of Precise Mortgages
Irregular incomes and complex accounts should not be a barrier to self-employed workers when it comes to securing a loan, says Alan Cleary of Precise Mortgages.
The make-up of the UK’s workforce is changing. The recent announcement that the number of people in work in the UK is the highest since records began in 1971 is something to be welcomed, but that only tells half the story.
The UK also has a record number of people working for themselves. According to the latest government figures, of the 32.7 million people now in employment, 4.83 million of these are self-employed. These workers can take many forms – from professional landlords to tradespeople, taxi drivers to freelancers – but one thing they can all experience is a difficulty in securing a residential mortgage or loan.
So with more people than ever before now working for themselves, why are so many of them still struggling to get the mortgages they want?
The Mortgage Market Review 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 with 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 mortgages they require, as well as an increase in brokers struggling to place their customers’ cases.
Fortunately, specialist lenders 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, these 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.
Many specialist lenders accept one-year figures and will take other income sources, such as pension contributions and car allowances, into consideration.
So if you are approached by a self-employed customer who is struggling to get the mortgage or loan they want with a mainstream lender, make sure they know there are other lenders out there who can help them.
With the number of people working for themselves growing, it has never been more important that they can turn to lenders who take a common-sense approach, taking each customer’s individual circumstances into account and assessing every case on its own unique merits.