There have been calls for the mortgage industry to catch up with the 21st century and end the assumption that a landlord with a PAYE income is more secure than a sole trader or contractor.
Latest figures from the Office of National Statistics show that the level of self-employment in the UK increased from 3.8m in 2008 to 4.6m in 2015. What’s more, the age of both full and part-time self-employed has also increased.
For finance and business services, there has been a considerable increase in the South East and London. In all, the number of self-employed workers is catching up with the public sector-amounting for 16% of the UK’s workforce.
New research from The Tenancy Deposit Scheme shows that nearly 20% of landlords have got their own business-with almost a third of these salaried.
However, The Mortgage Broker Ltd states despite the fact that self-employment is growing and making waves in the UK economy, a lot of self-employed landlords are struggling to get a mortgage.
Darren Pescod, Managing Director of The Mortgage Broker Ltd, noted: ‘Figures from Nottingham Building Society show that nearly one in eight self-employed people have been rejected for mortgages since working for themselves, despite often earning more than in their previous full-time employed job.’
‘Furthermore, the research reveals 12% of self-employed workers have been turned down for a first-time mortgage or remortgage, underling the problems of proving income and affordability for customers who are not full-time employees,’ he continued.
Tighter Lending Criteria
Moving on, Mr Pescod said: ‘Ten years ago, sole traders had no problem securing a BTL mortgage, but thanks to tightened lending criteria, many banks and building societies are turning down self-employed investors. The reality is that a borrower with appropriate mortgage protection in place is low risk, regardless of whether they have their tax paid for them, or, if they do it themselves.’
‘Historically, the self-employed landlords have been a fairly marginal group and many lenders could safely ignore them. However, the rise of the ‘gig economy’ – people having temporary jobs, or doing separate pieces of work, each paid separately, rather than working for employers – is growing fast and will lead to changes in mortgage lending and the economy overall.’
Concluding, Pescod said: ‘Thankfully, we now have access to mortgage lenders that are looking at the self-employed a bit more leniently, with some lenders considering criteria of only needing one year’s accounts where previously three years accounts was the minimum required.’