Self-employed? Increase your mortgage prospects from 5% to 94% with a specialist broker

Together has just published interesting research about residential mortgage lending. In it, the property finance firm looks at:

• the recent history of self-employed applicants;
• (scary!) predictions for projected self-employed mortgages over the next five years.

In isolation, the headlines for both the recent past and the near future leave the reader agog.

First, the research found that only 5% of self-employed applicants are successful.

The cited reasons are familiar to us, especially to our contractor borrowers. More about those reasons, shortly.

But, it’s the second headline, the prediction, that makes you take a step back.

According to Together’s research, there’ll be a 67% rise in self-employed mortgages in the next five years.

In pounds and pence, the research suggests self-employed lending will balloon from £20.9bn (2023) to £34.8bn (by 2029). That’s a tad more than inflation, eh? (Well, for now…)

Let’s take a look at what these predictions could mean.

A potential explosion of self-employed mortgage applicants

Twenty years ago, there were 3.2m self-employed people. Today, there are 4.3m, an increase of around one-third. So, why are we expecting the sudden ramp-up in that figure?

Well, in Q1 of 2024 alone, the self-employed ranks in the UK grew by 183,000. It’s no surprise; here’s why.

The societal melting pot

The business landscape is changing. Technological advancements are catapulting us into the future more rapidly than ever before. Companies need to adapt to and adopt those developments. But they don’t necessarily need full-time staff for that purpose.

Although not in their entirety, filling these gaps accounts for many IT contractor roles. But this space is expanding fast.

Visit any of your social networks and actually read the ‘sponsored’ posts (instead of skimming them). If your search/like history shows any hint of an interest in tech, you’ll get bombarded with AWS cloud architect training opportunities, or similar.

These are lucrative positions. More importantly, they’re self-employed roles. Many even hint they’ll have a job for you at the end of the 6-month training.

And that’s just one sector of self-employment.

Changing attitudes of the mom-and-pop store owner

It’s not just big business that’s changing. COVID taught us that we can make money from home by embracing our inherent talents. Lockdowns, in fact, almost forced us to fend for ourselves.

Now we’ve had a taste of it, it’s proving difficult for many to return to the rat race. This is playing out in our evolving work and lifestyle patterns as we return to normal.

It all means that more of us have ‘non-standard’ lifestyles and income. And, boy, do we know about that?!

Over the last two decades, we’ve seen how difficult it is to change traditional lenders’ attitudes. Trying to get them to move away from outdated, biased lending criteria has often been like pulling teeth.

The gig economy and flexible labour workforce are growing exponentially

Even more recently, we’ve learnt there simply aren’t enough workers in the construction industry to fulfil Labour’s home-building target.

This is one of the key measures by which the Labour government has invited us to judge them. To that end, we can expect a huge push to get apprentices or workers who’ve left the sector to join the Construction Industry Scheme.

CIS workers are another self-employed sector typically unsuccessful with mortgage lenders. Their increased ranks will only compound the research’s figures.

The research data covering recent self-employed applicants

A couple of the headlines from the research really stand out and back up what new clients who come to us tell us.

Of the ‘non-standard’ self-employed applicants who were rejected:

• 22% were rejected because they were self-employed;
• 10% were rejected because their income fluctuated.

But it’s the bottom line in Together’s research that’s genuinely horrifying:

“in the last year, only 5% of self-employed applicants have successfully secured the mortgage they were after.”

And what would happen if we took the current figures and extrapolated them by the predicted 67% rise by 2029?

It would leave hundreds of thousands of rejected and dejected entrepreneurs unable to buy the home their income deserves.

Specialist income needs a specialist to interpret it

We can’t let that happen. Well, we don’t. But it’s like we say so, so often:

‘non-standard’ income means you don’t conform to the outdated criteria lenders at the High Street level still peddle.

This is the difference: we convert 94% of our self-employed mortgage cases.

The majority of those limited company contractors and umbrella employees. But there are also ltd co. directors, freelancers, sole traders and CIS workers in that mix, too.

The only scenarios we can’t help with are:

• Sometimes, when clients are attempting to secure a mortgage on a non-standard construction property;
• When clients have severe bad credit, including CCJs, defaults and IVAs;
• With clients who have less than one year’s trading history (this doesn’t apply to contract workers);
• Or where clients are going for a property that their income just doesn’t warrant
  • (often, above 5 × their annualised contract income, depending on their unique situation).

You have a specialised income structure; you need a specialist mortgage broker

As a self-employed applicant, you’re a specialist borrower. You need a proven specialist broker to interpret your income to a senior or specialist underwriter for you.

Many of you will feel trapped by or familiar with the barriers we’ve outlined here from Together’s research. Let us show you why our mortgage completion success is so vastly different from the norm.

20/1 against you getting a mortgage the traditional way are long odds. If you want to reduce those odds in your favour, come talk to us before showing the bookie your stake.