Banks and Building Societies Should Lend to Self-Employed Landlords, Insists Broker
Banks and building societies should be lending to self-employed landlords, insists a leading national mortgage broker.
The Mortgage Broker Ltd is urging the mortgage industry to catch up with modern living and end the view that self-employed landlords are less secure than those with PAYE incomes.
According to the latest data from the Office for National Statistics (ONS), the level of self-employment in the UK rose from 3.8m in 2008 to 4.6m in 2015.
The age of both the part-time and full-time self-employed has also increased, and the percentage of self-employed individuals in finance and business services has risen considerably, concentrated in the South East and London. In fact, the total number of self-employed workers is fast catching up with the amount in the public sector, accounting for 16% of the workforce.
Research from the Tenancy Deposit Scheme (TDS) shows that almost 20% of landlords have their own business and nearly a third are salaried.
According to The Mortgage Broker Ltd, despite the fact that self-employment is growing and making a significant contribution to the UK economy, many self-employed landlords are struggling to get a mortgage.
The Managing Director of the broker, Darren Pescod, says: “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, underlying the problems of proving income and affordability for customers who are not full-time employees.”
He continues: “Ten years ago, sole traders had no problem securing a buy-to-let 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.”
Pescod concludes: “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.”
Have any self-employed landlords had difficulty in obtaining mortgage finance?