Thursday, July 7, 2022
Finance

Self-employed twice as likely to be rejected for mortgage

Self-employed

Nearly a quarter (23%) of self-employed individuals have had their mortgage application denied in the past compared to just 12% of employed workers

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

Nearly a quarter (23%) of self-employed individuals have had their mortgage application denied in the past compared to just 12% of employed workers.

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.

Even after taking steps to make themselves a more appealing mortgage applicant, such as a strong credit score, self-employed individuals are more easily deterred from getting a mortgage or do not see the benefits of accessing loans due to their employment status. In fact, 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.

Peter Beaumont, CEO at The Mortgage Lender, said: 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. 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.

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, he said.

He said: At the same time, however, the onus must fall on lenders to be more open to working with these enterprising individuals.

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