BLOG: Self-employed mortgage applications shouldn’t be one size fits all

The ‘plight of the self-employed’ has been an ongoing discussion for us at Saffron Building Society and our broker partners. Since 2020, the self-employed have seen increasing challenges when applying for a mortgage, and the ‘one size fits all approach’ of larger lenders saw the viability and accessibility of mortgages decrease.

The situation doesn’t seem to be improving, as the Mortgage Broker Tools (MBT) Affordability Index identified that a third of all self-employed applications did not pass the lenders affordability criteria. Following the turmoil of recent years, with the pandemic and Brexit destabilising the business sector, the two to three years of accounts typically requested on application unsurprisingly became a devastating hurdle for the self-employed.

At Saffron, we have always considered ourselves champions of the self-employed and take pride in listening to both our broker partners and borrowers to understand the issues faced. We recently undertook an independent survey with 1,000 self-employed respondents.

Nearly half (49%) admitted they wouldn’t feel confident finding a suitable mortgage lender that would offer a product suited to their needs, whilst still passing affordability. Only 1 in 5 (19%) believed that there was a good choice of lenders offering products for the self-employed, and just 15% agreed with the statement that here are plenty of mortgage products available on the market for self-employed individuals. As a caveat, these statistics may seem shocking, but it is worth remembering many of the respondents may not yet have engaged with a broker. But it also highlights that we need to be marketing directly to them - in collaboration as brokers and lenders - to ensure self-employed borrowers know that there are specialist products available to them. For example, websites making it clear that brokers have access to products and solutions solely for them?

At Saffron, we are pleased we can offer more opportunities for self-employed customers. In recent times, we have applied an even more flexible, case-by-case approach to self-employed lending. We only require one year’s accounts, alongside acceptable projections for the future, on our specialist self-employed mortgage (and 2 years on a standard residential mortgage), have added wider education into our lending process by increasing the training of our BDM and support team to ensure you, our broker partners, get the right advice from the onset. But, moreover, we have altered when we engage our underwriters in more complex cases, allowing us to look at every case on its individual merit. This also includes direct communication from the underwriter to the broker, where the case is complicated or declined, to discuss next steps and guide the broker through the decision - which has been favourably received.

Understanding supporting documents

As lenders, we know that some information we may request for your self-employed applicants is additional to a typical residential mortgage. A third of our survey respondents raised that their broker didn’t appear to have a definitive understanding of their business accounts as an example, something that is easily resolved, and we are addressing with the actions we have mentioned above.

Bringing the industry together

It is now time for lenders and brokers to come together to address the issues faced by the self-employed. The more we collaborate, the more chance we have to innovate and evolve as the market continues to challenge us. Explore our self employed mortgage range on our web site and watch our webinar featuring a client case study where a broker gives us her experience of the sector first hand

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