Levelling the playing field for self-employed mortgages
Pete Mugleston, co-founder of Online Mortgage Advisor
When Theresa May took over the reins from David Cameron as Prime Minister, she announced to follow in his footsteps by leading a “one nation government” working “not for a privileged few but every one of us.”
Alongside these bold statements, on the eve of the Conservative Party Conference, May announced she would introduce a review of employment practices to ensure they are “keeping pace with the changing world of work”.
The Independent Review of Employment Practices in the Modern Economy was commissioned on 1 October 2016 with May appointing Matthew Taylor to conduct the review.
The face of the employment market is ever-changing. The level of self-employment in the UK increased from 3.8 million in 2008 to 4.8 million last year. More people are working from home, more start-ups are launching every day and more freelancers are choosing to leave the daily grind than ever before.
The employment practice review will not only bring extra job security to the self-employed, it will have a positive effect on their mortgage application too.
How the review will help the self-employed obtain a mortgage
The review brings about a conscious shift in favour of the self-employed. With the active protection of their livelihood, we should see more and more of the self-employed securing successful mortgages, especially when considered alongside the Mortgage Market Review, which assess overall financial health.
It’ll give lenders the confidence and encouragement to loosen their rules on approving mortgages to those who aren’t classed as being in ‘full-time’ work.
Lenders are already starting to adapt their lending criteria to help boost the number of self-employed mortgages it issues in an attempt to break the divide between the employed and the self-employed.
For example, Kent Reliance has reduced the minimum requirement of work history, from three years of accounts to one year, making it more in-line with employed individuals. Ipswich Building Society now also offers mortgages with less than three years of accounts too and new lenders are coming onboard with the idea every week.
Making it easier for the self-employed to find mortgages
Although mortgage lenders are changing their criteria to be more flexible for the self-employed, it can still be quite a task to find lenders that will lend to you upon someone’s specific work history and that’s because it tends to be the smaller lenders that are more receptive to being flexible, rather than the big banks.
These lenders don’t always advertise their deals or the criteria they lend against and some may only be available through brokers.
That’s why, if a small business owner has at least a year of accounts, audited by a professional accountant, it’s always best to seek independent mortgage advice or find a mortgage broker who has knowledge of what’s available on the market at that time and can advise based on a person’s situation.
It’s encouraging to see the government and lenders working together to make it easier for self-employed people to jump on the property ladder, but there’s still a way to go until all lenders realise the benefits lending to everyone equally will have to their business.