SPECIAL FEATURE: Self-employed deserve better
Jeremy Wood, chief executive of the Dudley, says it’s time for the industry to reassess the lending apartheid which currently leaves the self-employed at a huge disadvantage when it comes to home ownership
Some argue that the drop in the unemployment figures is an aberration, partly as a result of more people becoming self employed. The inference being that in some way it does not count as ‘real’ work. Certainly, as far as attempting to buy a property or remortgaging the self employed and contractors still face the same kind of discrimination from lenders.
How many would be entrepreneurs and those who have been their own bosses for some time find that once the question of employment comes up, most lenders tend to start withdrawing the welcome mat when the applicant is self employed?
There is still a quaint idea that in some way employment represents solid security for a loan, while self employment, unless historic, is seen as flaky. The lessons of the past ten years that have seen companies laying off staff in their hundreds of thousands are being ignored. Today’s workforce is no longer any safer than being self employed. Lending models still seem to perpetuate the myth of some kind of job for life fantasy. Employers now need to be able to upsize and downsize to stay competitive and as we are seeing, the biggest moves in reducing the unemployment numbers are coming from the newly self employed and those on contract work. OK, new enterprises might not make it and therefore it can be argued that is difficult to adequately ensure lenders are being prudent in assessing the risk but I would argue that trying to assess the likelihood of redundancy for an employed client is just as pertinent.
It is time for the industry to reassess this kind of lending apartheid, which currently leaves the self employed at a huge disadvantage when it comes to home ownership. Some lenders are beginning to respond positively, however the regulatory regime does not help in this respect by putting the onus on lenders to ensure a satisfactory ‘client outcome’. Therefore the opportunity for customers who have already had to think long and hard about the financial ramifications of self employment, to exercise their own judgement to enter into a mortgage contract, is effectively neutered. Nanny knows best.