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How specialist lenders can empower self-employed borrowers
Traditionally, self-employed individuals and those with irregular incomes faced significant challenges in securing mortgages due to difficulties in proving consistent income levels.
However, the mortgage landscape has evolved, with specialist lenders playing a crucial role in making mortgages more accessible for this demographic. This shift is timely, given recent trends highlighted in the Property and Homemover Report by TwentyCi, which showed that self-employed estate agents increased their market share of property exchanges to 2% in Q3 2024, up from 1.6% in the same period of 2023, marking a 25% year-on-year rise.
Since 2019, the market share of self-employed agents has expanded more than sevenfold, reflecting the success of this flexible business model. This growth aligns with broader trends across various industries where self-employment has become a viable career path, particularly as the UK workforce adapts to changing demands.
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To support this growing segment, specialist lenders have tailored their offerings to meet the unique needs of self-employed individuals with variable incomes or complex financial profiles. For instance, when assessing a self-employed applicant with over three years of trading history, lenders may base affordability calculations on the most recent year's income if it's higher than previous years. An accountant's certification can further validate income sustainability and help meet lender criteria.
This approach was exemplified in a recent case involving two self-employed individuals struggling to remortgage due to fluctuating incomes during the pandemic and a small credit default. While mainstream lenders declined their application, a more nuanced view allowed for a pound-for-pound remortgage option on a part-and-part repayment basis, improving their financial position without increasing monthly payments.
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The case underscores the importance of specialist solutions in today's mortgage market. Many brokers express frustration when trying to fit self-employed clients into traditional lending models used by high street lenders, where applications might be rejected if they don't meet specific criteria points, despite an overall low-risk profile.
Specialist lenders offer solutions by considering each application on its merits, accounting for factors like fluctuating incomes and minor credit issues. With products designed for diverse borrowers—from professionals and key workers to those with complex credit histories—specialist lenders are essential in ensuring access to needed mortgage products as the UK workforce continues to evolve. The intermediary market must leverage this expertise to provide clients with flexible solutions tailored to their increasingly diverse requirements.
References:
https://www.estateagenttoday.co.uk/breaking-news/2024/10/self-employed-brands-now-larger-than-biggest-agents-claim
*This article was originally published on The Intermediary
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