Specialist lender Bluestone mortgages has called on lenders to respond to the changing world of work, pointing to the rising number of contractors and freelancers.
With the number of contractors in the UK standing at 1.9 million – an increase of a third from 2008 – shifts in the structure of the labour market make it increasingly important for lenders to provide for individuals who fall outside traditional lending models.
Catering for this section of the population requires flexible criteria and a more bespoke approach to client assessment.
Matt Andrews, managing director of Bluestone Mortgages, said: “The UK is enjoying the lowest levels of unemployment since 1971. Nearly three quarters of people who can work have jobs, with a particular rise in contractors, freelancers and entrepreneurs. In fact, the number of contractors in the UK stands at around 1.90 m – up by more than a third since 2008.
“Despite the nature of the UK workforce changing significantly over the past decade, many mainstream lenders have failed to update their attitudes to borrower profiles to keep pace with this evolution. As a result a large section of the UK workforce struggles to access lending, as they still fall outside of conventional credit scoring models.
“The strict, automated scoring models used by many high street banks to decide who can afford a mortgage or loan are often based on simple credit calculations, with little thought given to who is behind the numbers.
“Many of these people represent a good credit risk, but need a more in-depth underwriting experience. As the workforce shifts, so must the models lenders use to assess affordability. Hundreds of the UK’s new business owners and freelancers gained years of experience in their chosen fields before opting to become self-employed, but they still lose out on the best rates and products when applying for a mortgage. It is concerning to see that these people are deemed unreliable compared to people in their first jobs, with relatively little job security and short credit histories.
“Only when you explore and weigh each person’s financial background, can you really begin to assess their true affordability. For this reason a balance needs to be struck between automated technology, and intelligent technology to ensure a consumer’s individual circumstances are taken into account, and lending decisions are made on a case by case basis.”