Nearly three quarters (71 per cent) of the UK’s self-employed population cited their employment status as a disadvantage when it comes to obtaining a mortgage, according to online mortgage broker Trussle.
There are currently 4.85 million self-employed people in the UK, though this figure is expected to increase to 5.5 million by 2022, with the community potentially soon outnumbering the public-sector workforce.
Furthermore, when it comes to mortgage applications, the self-employed are required to jump through additional hoops, with many lenders requesting additional documents including their SA302 Tax Year Overview, along with two to three years’ worth of accounts. Many lenders also assess their affordability based on the past two to three years of earnings, rather than their current income.
Just over a third (35 per cent) of self-employed borrowers admitted that sourcing this information was challenging. As a result, many self-employed people face longer application and approval times, while also suffering additional costs to source documentation needed for their mortgage.
In its Mortgage Saver Review, Trussle revealed that two fifths (38 per cent) found the entire mortgage experience difficult to navigate due to poor guidance from lenders and a lack of clarity over what additional documents are needed.
Commenting on the findings, Trussle CEO and founder Ishaan Malhi said: “The self-employment sector is growing quickly, but the industry isn’t adapting fast enough. Every year, self-employed borrowers face an inconsistent, complicated and time consuming mortgage journey.
“I’ve experienced the hurdles that self-employed people face first-hand. Before I founded Trussle, I was itching to get on the property ladder. As a self-employed mortgage applicant, I was treated differently by lenders due to my employment status. I wasted hundreds of pounds between various brokers who eventually shut the door in my face. I ended up out of pocket, confused and without a mortgage.
“And I’m certainly not the only one whose experienced the outdated and inaccessible process. From unsuitable mortgage products, to additional costs and a complicated application process - the self-employed are being let down.
“It’s not good enough. Home ownership should be accessible for everyone. We’re calling on the industry and the Government to work more cohesively to make changes for the better.
Trussle is calling for a collaborative effort from the industry and the government to better support the self-employed. Suggestions include integrating Open Banking to help those with multiple income streams, becoming more flexible with tax reporting periods, and assessing self-employed mortgage applicants on their current, and not historic, income.
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