Together projects £34.8 billion in loans by 2029 despite industry challenges
Lending to self-employed mortgage applicants in the UK is expected to rise significantly over the next five years, according to findings from Together’s Residential Property Market Report.
The specialist lender predicts a 67% increase in lending to self-employed borrowers, growing from £20.9 billion in 2023 to £34.8 billion by 2029.
The report highlights the challenges faced by the self-employed in securing finance, despite their growing numbers. Over the last two decades, the self-employed population has increased from 3.2 million to 4.3 million, with an additional 183,000 individuals becoming self-employed in the first quarter of 2024 alone.
Self-employed applicants, ranging from gig workers to business owners, are more likely to face rejection from high street lenders due to fluctuating incomes, multiple income sources, or insufficient income documentation. Together’s research found that 22% of rejected mortgage applicants classified as “non-standard” were turned down because they were self-employed, while 10% cited sporadic income as the primary barrier.
The report also revealed that only 5% of self-employed mortgage applicants have been successful in securing loans over the past year – underscoring the need for greater support and flexibility in the mortgage industry to accommodate the rising number of self-employed borrowers.
The trend towards self-employment is expected to continue, reflecting shifts in work and lifestyle patterns. Together noted a year-on-year increase in full-time self-employed workers from April to June 2024, accompanied by a rise in homeownership loan enquiries from this demographic.
John Barker (pictured), chief executive of personal finance at Together, attributed the challenges faced by self-employed borrowers to a cautious lending environment.
“During economic downturns, mainstream lenders tend to favour employed borrowers with perfect credit histories over self-employed individuals or those with past credit issues, even when the latter can provide larger deposits,” Barker said.
He called for a more inclusive approach from the financial services industry, with lending decisions based on a comprehensive assessment of applicants’ financial circumstances.
“Bespoke, non-automated underwriting allows specialist lenders to take a more holistic view, applying common sense to lending decisions and considering the full picture — not just credit scores or loan-to-income ratios,” Barker added.
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