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Study shows self-employed are twice as likely to face mortgage rejection

Self-employed individuals are twice as likely to be rejected for a mortgage, a new report from The Mortgage Lender (TML) shows.

Its Exploring Adverse Credit study reveals nearly a quarter (23%) of self-employed individuals have had their mortgage application denied in the past compared to just 12% of employed workers.

Self-employed applicants are often treated with stricter affordability assessments mainly because they are considered to have more irregular or complex incomes and are therefore viewed as riskier to lenders.


The survey found that of those who have ever tried to get a mortgage, 19% have had mixed results of whether their application was accepted or denied, compared to only 11% of employed individuals who said the same.

The number of people choosing to work for themselves has risen steadily since the early 2000s. While some self-employed people can also be high earning, income is still deemed complex, making it challenging for this group to access finance to either buy or re-mortgage a property.

But even taking steps to make themselves a more appealing mortgage applicant, such as a strong credit score, self-employed individuals are more easily deterred from getting a mortgage or do not see the benefits of accessing loans due to their employment status.

In fact, less than two in five (38%) agreed that the strength of their credit score allowed them to access better loans and interest rates, compared to nearly half (48%) of employed people who said the same.

With a growing number of people becoming self-employed, lenders must adapt and be open to offering mortgages to those with more complex incomes.

Peter Beaumont, chief executive officer at The Mortgage Lender, comments: “There are around 4.2 million self-employed people in the UK, and it is typical for that number to grow when coming out of a recession, or in this case a pandemic also.”

“While it may offer those workers more freedom, the major drawback of self-employment is the perception of income inconsistency, and consequently a greater challenge when it comes to borrowing large sums of money.”

He adds: “Fortunately, there are steps the self-employed can take to make themselves more attractive to lenders, like increasing their credit score, or saving for a bigger deposit to bring down their loan-to-value ratio.”

“At the same time, however, the onus must fall on lenders to be more open to working with these enterprising individuals. We are proud to offer a competitively priced product range that caters to those with complex incomes.”


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