This is because they worry about strict rules on proof of earnings at high street lenders.
More than a third (36%) of self-employed people who wanted to buy a home over the past five years have been put off applying because they expected to be turned down, research from Together has found.
According to the specialist lender the self-employed– who account for 15% of the UK workforce and the equivalent of 4.8 million people – are being put off before even applying for a mortgage or remortgage. This is because they worry about strict rules on proof of earnings at high street lenders.
Pete Ball, personal finance chief executiveat Together, said:“These findings are understandable, but the fact that so many people are doing themselves out of owning their own home because they expect rejection is very worrying.
“The way people live and work has changed enormously over the past few years, and it doesn’t make sense for the mortgage market effectively to lock out such a large group as the self-employed simply because of the way they earn a living.
“It therefore requires lenders to invest time and develop experience in understanding applicants’ circumstances in order to be able to help them.
“Providers have, quite rightly, to ensure that mortgages are affordable for borrowers, but that should not be done at the expense of making it harder for the self-employed. There are signs of improvement across the market, but greater flexibility is needed.”
Around 21% of self-employed borrowers who have applied have been rejected, with a fifth of them being turned down more than four times.
The main reasons for being rejected by high street lenders cited by one in four self-employed borrowers were: a lack of recent tax returns; irregular or insufficient income; and the mortgage requested being too large.
One in five (20%) of self-employed borrowers said they were denied a mortgage because they didn’t have enough proof of future earnings.
Two-thirds (65%) of self-employed workers have found the process so bruising they have considered switching to the security of a directly employed job to boost their application chances.
Self-employed workers often find it more challenging than employees to secure a mortgage because there is no employer to vouch for their wage, so they are required to provide far more evidence of income than other borrowers.
Almost half (47%) of self-employed workers aren’t aware there are specialist providers which can help.
