Almost three quarters (72%) of business owners believe that self-employment makes it harder to get a mortgage, Pepper Money research has found.

The firm’s specialist lending study revealed that 46% take this a step further, thinking that self-employment makes it a "lot more difficult" to get a mortgage.

Chief executive officer at Simply Lending, Adam Hinder, said: "Traditionally lenders have taken a rigid approach to underwriting self-employed income, so it’s perhaps unsurprising that so many self-employed people think securing a mortgage is going to be such a challenge."

Pepper Money also found that 29% of self-employed people said they make at least 10% more profit in the last year compared to the preceding two years, while 15% have made at least 20% more profit in the last 12 months.

Hinder added: "A growing number of lenders, like Pepper Money, take a more progressive approach, with criteria that can consider affordability on the latest year’s accounts or profit retained within the business, coupled with hands-on underwriting that gives proper consideration to a customer’s individual circumstances. This is helping to open up more opportunities for the self-employed and, as brokers, it gives us the chance to help more customers secure the mortgage they deserve."

Director of business development at Pepper Money, Ryan Brailsford, said: "Many lenders will base affordability calculations for self-employed customers on an average of their last three years’ submitted accounts, yet our research shows that nearly a third of business owners have increased their income by at least 10% over the last 12 months.

"Similarly, there are often occasions where a limited company director may decide to retain some of the net profit within the business instead of paying it all as dividends. This can help reduce their personal tax liability, but it also limits their borrowing power when applying for a mortgage."

---