Self-employed individuals are twice as likely to be rejected for a mortgage, new research from The Mortgage Lender (TML) has suggested.

TML has published a new report, titled Exploring Adverse Credit, which revealed revealed that 23% of self-employed individuals have had their mortgage application denied in the past, compared to just 12% of employed workers.

Self-employed applicants can often be treated with stricter affordability assessments to those who are employed, mainly because they are considered to have a more irregular or complex incomes and are therefore viewed as riskier to lenders.

TML suggested this can make it trickier to get through the mortgage process. The survey, based on 2,002 UK adults, found that of those who have ever tried to get a mortgage, 19% of self-employed applicants have had mixed results of whether their application was accepted or denied, compared to only 11% of employed individuals who said the same.

“There are around 4.2 million self-employed people in the UK, and it is typical for that number to grow when coming out of a recession, or in this case a pandemic also,” said TML CEO, Peter Beaumont.

“While it may offer those workers more freedom, the major drawback of self-employment is the perception of income inconsistency, and consequently a greater challenge when it comes to borrowing large sums of money.”

TML stated that even if self-employed individuals were to take steps to make themselves a more appealing mortgage applicant, such as a strong credit score, this group is more easily deterred from getting a mortgage or do not see the benefits of accessing loans due to their employment status.

The report revealed that less than two in five (38%) agreed that the strength of their credit score allowed them to access better loans and interest rates, compared to nearly half (48%) of employed people who said the same.

Beaumont added: “Fortunately, there are steps the self-employed can take to make themselves more attractive to lenders, like increasing their credit score, or saving for a bigger deposit to bring down their loan-to-value ratio.

“At the same time, however, the onus must fall on lenders to be more open to working with these enterprising individuals. We are proud to offer a competitively priced product range that caters to those with complex incomes.”

Share Story: