The UK’s self-employed workforce holds nearly £82billion in disposable income, yet four in five entrepreneurs have struggled to secure a mortgage.
Despite their growing wealth – a combined nest egg of £81.5billion – many face barriers to accessing the mainstream mortgage market.
A new analysis by the specialist property lender Together reveals that 87% of self-employed workers agree that it is “much harder” to get a home loan because of their employment status.
Additionally, 83% feel that current mortgage lending criteria are biased against them, while 87% are willing to take on extra work to prove their income on paper.
Ryan Etchells, chief commercial officer at Together, said: “The country’s self-employed workers are crying out for lenders to support their home-owning ambitions.
“In a lot of cases, despite holding an average deposit of £51,000 saved for a new home, self-employed customers still contend with major issues, financial prejudices, and a lack of understanding of their incomes and finance needs from mainstream banks.”
He added: “In economically tough times, lending appetites for mortgage applications considered complex, dwindle to almost nothing, which we would say is unfair when it comes to the nation’s self-employed wealth creators.”
Together’s research shows that the self-employed market now stands at 4.4 million, with income levels for the sector growing by 7% since COVID and 26% over the past 10 years. However, their growing wealth doesn’t always translate into homeownership.
At an individual level, research found that self-employed individuals have an average of £51,000 saved for property deposits, yet they continue to face challenges in securing mortgages.
Nearly one in five (19%) are looking to buy property in the next 12 months, while 45% plan to buy at some point in the future, with 68% of them intending to seek a mortgage.
Greg Cunnington at Legal & General mortgage services, added: “Our data from Ignite, our broker technology platform, shows that six of the top eight income searches in the last 90 days were for self-employed applicants, reflecting the demand for this marketplace for home ownership and refinance options.
“The most searched option was for limited company directors. However, of these searches, only 39% of lender responses for the client’s requirement were a yes, with another 11% refer, meaning a huge 50% of searches had a no response from lenders.
“This shows the opportunity that exists in this marketplace for lenders to really aim to support self-employed clients.”
There are growing calls for banks to reevaluate their automated, “one-size-fits-all” mortgage decisions. Many are advocating for a more flexible approach to unlock the home-owning ambitions of millions of self-employed workers, stimulate the housing market, and create new opportunities for developers.
