Barriers to self-employed home buyers

Posted: 4/9/2021

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The self-employed are increasingly pessimistic about their home buying chances, as the pandemic has exacerbated difficulties felt by this group in trying to get a foot on the housing ladder, according to new research.

The challenges self-employed renters are facing in purchasing their first home has become more pressing due to the pandemic, the study shows.

A survey found that one in five – 20% – self-employed renters say they are more motivated to purchase property due to the lockdown experience and a quarter – 25% – are currently actively saving for a deposit.

But many believe that conditions for purchasing property as a self-employed worker have worsened, with 28% of respondents saying that saving up for a deposit is more of a challenge now due to the financial impact of the pandemic and one in five – 18% – have delayed their home buying timeline due to the pandemic.

Despite over a quarter – 27% – of self-employed renters now seeking to improve their credit to boost their home buying chances, 14% say their credit score has been adversely affected due to the pandemic. These increased challenges have meant over a third – 36% – of self-employed renters say they feel buying a home is unobtainable for them right now.

Aldermore bank, which conducted the research, suggests the self-employed may be overlooked. Over half – 56% – of those surveyed think mortgage lenders do not do enough to support the self-employed. Only 14% of self-employed workers have consistent income month to month, and so many understandably feel high street lenders do not give them a fair hearing when going through the application process.

The number one reason for a mortgage application rejection for the self-employed was being self-employed, with a third – 32% – citing this as a reason for a rejection.

Just 29% of self-employed home owners believe mortgage lenders fully understood their earning capabilities when they applied, with half – 50% – think their lender only understood to a degree and nearly a quarter – 21% – say their mortgage lender did not understand their earning capabilities at all.

This has led to two-thirds – 64% – of the self-employed believing mortgage lenders treat self-employed people worse than those who are employed with a regular salary.

Jon Cooper, head of mortgage distribution, Aldermore said: “The UK is an entrepreneurial nation, and the growing self-employed workforce is integral to our economy, so it is disappointing to see persistent barriers for them when seeking to secure a mortgage, which appears to have been exacerbated by the pandemic.

“The self-employed need not despair, however, as the growth of specialist lenders has opened up an increasing number of options that can provide pathways to home ownership. Our research shows 52% of the self-employed workers in the UK have seasonal or extremely variable income streams month to month, which may not fit the tick-box approach of many high street lenders, but specialist lenders can dig into the detail to understand complicated income streams ensuring the self-employed have opportunities to get on the housing ladder.”

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