"The self-employed are the hardest type of borrower to systemise"
The majority of brokers surveyed by United Trust Bank (UTB) said mainstream lenders have made it more difficult for self-employed applicants to get a mortgage, with some also claiming that these customers have been marginalised by lenders in recent years.
According to UTB, 91% of brokers had observed how mainstream lenders have tightened their loan criteria for self-employed applicants. Findings of the survey also suggested that customers with complex incomes earned from being either self-employed, a sole trader, or having multiple income sources will continue to account for a large portion of the UK workforce, with 81% of brokers claiming that their clients’ incomes have become more complex over the last 12 months.
Additionally, 88% of respondents believed that self-employed customers are being marginalised by mainstream lenders. This was particularly true for those who took advantage of legitimate COVID grants, with brokers saying that lenders struggled to “take a view” on clients in these situations and that they should have been able to apply an objective assessment on the lockdown’s impact on previously successful businesses.
UTB surveyed over 100 mortgage brokers for the whitepaper ‘Growing opportunities for brokers in the specialist mortgage market.’
The results of the survey confirmed that the key factors differentiating mainstream from specialist cases are income, credit history, credit score, loan size, and property type. The whitepaper also quoted Matt Arena, MD of Brilliant Solutions, who said that specialist cases are set apart by “the necessity for lenders to involve human decision making rather than apply inflexible automated underwriting.”
“The self-employed are the hardest type of borrower to systemise, so it is fair to assume they will continue to form a growing part of the specialist lending sector,” Arena said.
Twenty-nine per cent (29%) of the brokers who participated in UTB’s study said more than half of their cases from the past year could be described as specialist, while 24.5% said about a quarter to a half of their cases had been specialist. Additionally, 78% believed the specialist mortgage market represents “a bigger opportunity today than in the past.”
“Many applicants no longer fit traditional ‘tick-box’ criteria and that group is only going to get bigger,” Buster Tolfree, director of mortgages at UTB, said. “The way people earn their income or incomes has and will continue to change. As such, income criteria will be an increasingly important factor for brokers when choosing where to place their cases. Although many applications will require the skills and judgement of an experienced professional to properly assess suitability, that same knowledge and flexibility can be applied when designing and managing auto-underwriting systems and criteria.”
Tolfree added: “The idea of being able to ‘take a view’ is more than simply having a human involved. It’s about the approach a lender takes to underwriting and in establishing criteria which recognise that incomes are no longer always singular and straightforward, credit histories aren’t always unblemished and some properties are more unusual than others. Automated or part automated application processes using time-saving technology do not discriminate against specialist cases per se, as long as the system is designed to accommodate applicants with more complex circumstances.”
