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Self-employed mortgage applicants expect to be rejected

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Self-employed workers are putting off applying for a mortgage because they assume they’ll be rejected by lenders, a new study shows.

Research by Together, a specialist mortgage lender, found more than a third of self-employed people (36 per cent) who wanted to buy a home of their own decided against applying for a mortgage in the past five years because they expected to be turned down.

Self-employed borrowers – who account for 15 per cent of the UK workforce and the equivalent of 4.8 million people – are being put off before even applying for a mortgage or remortgage as they worry about strict rules around proof of earnings at high street lenders, according to the research.

And it seems they may have grounds for caution. Together found around 21 per cent of self-employed borrowers who have applied have been rejected, with a fifth of them being turned down more than four times.

One in four self-employed people said they were turned down because of a lack of recent tax returns, irregular or insufficient income, or the mortgage requested being too large.

One in five said they were denied a mortgage because they didn’t have enough proof of future earnings.

The research shows 65 per cent of self-employed workers found the process so bruising they have considered switching to a directly employed job to boost their application chances.

Pete Ball, personal finance chief executive at Together, said: “The way people live and work has changed enormously over the past few years, and it doesn’t make sense for the mortgage market effectively to lock out such a large group as the self-employed simply because of the way they earn a living.

“It therefore requires lenders to invest time and develop experience in understanding applicants’ circumstances in order to be able to help them. Providers have, quite rightly, to ensure that mortgages are affordable for borrowers, but that should not be done at the expense of making it harder for the self-employed.”

For more, see: Top tips for self-employed workers applying for a mortgage

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