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More than a third of borrowers believe they can’t get a mortgage if self-employed

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06/07/2021
Over a third of would-be borrowers think that they will not be able to secure a mortgage if they are self-employed.

A survey by Shawbrook Bank, of more than 2,000 people, found that 35 per cent thought they couldn’t get a mortgage if they were self-employed.

Within that group, 23 per cent were unsure they would be able to secure a mortgage if they were self-employed.

Nick Morrey, product technical manager at broker John Charcol, said the perception that self-employed mortgages are hard to come is not necessarily true.

“They will be able to get a mortgage but maybe not at the amount they want,” he explained.

This was echoed by another broker, Colin Payne of Chapelgate Private Finance. He said: “Self-employed borrowers might not get the most competitive deal because they may not be eligible with a high street lender but there are solutions.”

Payne noted that the ultra-low interest rate environment may also have skewed self-employed views.

He said: “In the era of ultra-low interest rates we have a generation that thinks it is the norm to pick up an interest rate of 1.5 per cent. When you quote 2.5 to 3 per cent they think it is really expensive.”

Lending attitudes

Brokers said lenders were being more cautious when it came to self-employed mortgages but business was still being written.

Payne said: “We might have struggled with one or two but for the most part we have been successful. Most lenders are cautious, there is no doubt about that. But I think if you present a case in the right light, do the right digging into the business and how it is performing and how it was affected by the pandemic, most lenders are looking to help.”

Morrey said it may be challenging for some self-employed clients to secure mortgages, particularly if they work in sectors badly hit by the pandemic.

“[Self-employed borrowers] don’t use advisers as much as they should, so they get disappointed after the first two or three responses from banks,” Morrey said.

He added that this could be “disheartening” for self-employed clients who are looking on their own. They may feel “underserved” by lenders.

Habito’s mortgage broker team lead Alex Winn said: “We’ve not seen a big shift in the levels of demand for self-employed mortgages just yet. Most lenders need two years’ accounts so even if it is the case that people during the pandemic created new businesses and shifted to self-employed income, we might not see that shift be reflected in the number of mortgages being approved for a couple of years as people wait to be eligible.”

He added that lenders would be wary of heavily-impacted sectors such as hospitality and travel sector, although this could change following the economy’s full reopening on 19 July.

Attitudes to government support and grants also remained mixed.

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