12 Feb The Self-Employed Mortgage Struggle
As the leading independent estate agent in Virginia Water and the surrounding areas, we are instructed to bring to market a wide range of different properties; from spacious country mansions to gated development apartments. As a result we welcome people from all backgrounds and circumstances looking for a property for sale in Virginia Water or a property to let in Virginia Water into our office.
Mortgages are a complicated business and while we are happy to recommend our trusted mortgage brokers, we don’t offer advice. However, something that has come up on our radar recently is the rigmarole many of our self-employed clients have to go through in order to gain access to the best mortgage products. We had a look online at some of the challenges facing self-employed people in their search for a mortgage product.
Self Employed vs Bad Credit
According to research conducted by a leading online mortgage broker, just 76% of self-employed mortgage applications are approved compared to 89% of those with bad credit. The struggle is real and while the government is encouraging when it comes to taking an entrepreneurial approach to earning a living, the mortgage and lending industry holds different values; it’s a somewhat mixed message.
In certain areas of the country we have seen the occurrence of mortgage prisoners. This means that people who have existing mortgage agreements in place but when it comes to remortgaging or moving home, they are deemed unable to afford the repayments. This is due to new affordability criteria which are applied to every application. In theory, they are there to stop another financial crisis akin to the crash in 2008. However, in practice they make little sense, trapping people on variable (and often higher) rates of interest.
As a result of this we are seeing the financial industry developing their own mortgage products in order to provide a more inclusive range of products. Products like the family spring board mortgage and the government Help to Buy scheme and Stamp Duty Tax relief are all helping to make owning a property more accessible.
With the self-employed demographic making up a significant portion of the UK workforce it’s important that lenders recognise the challenges and develop products to fit the need. One of the most common problems for a self-employed person is only having one year of accounts. While many lenders require two or even three years of accounts, if you have a large increase in income in one year, they will only take an average of the period.
The mortgage industry is a fiercely competitive one, and that fact (along with the Bank of England base rate) is what is keeping mortgage rates at record lows. With First Time Buyer numbers at the highest numbers in more than a decade we are seeing lenders focusing mortgage products on specific demographics and so it is highly likely that there will be a much wider selection of self-employed mortgages products.
As a large portion of the work force in the UK it is likely that lenders will start to compete for the self-employed market, so while the struggle is real now, it is expected to become more flexible as the housing market stimulates the post-Brexit economy.
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