Self-employed face growing struggle to buy a home

People who work for themselves often have to jump through additional hoops to get a mortgage, and new research suggests that the situation is getting worse.

At a time when more people are thinking about buying their own home, Aldermore Bank found that the Covid-19 pandemic has exacerbated the difficulties experienced by self-employed people in getting a foot on the housing ladder.

The survey of 1,000 self-employed adults by Opinium for Aldermore Bank found that one in five (20%) self-employed renters are more motivated to buy due to the lockdown experience and one quarter (25%) are currently actively saving for a deposit.

However, over a quarter (28%) said that saving up for a deposit is more of a challenge now due to the financial impact of the pandemic and one in five (18%) have delayed their home buying timeline due to the pandemic.

What's more, despite over a quarter (27%) of self-employed renters seeking to improve their credit to boost their home buying chances, 14% said their credit score has been negatively impacted by the pandemic.

Over half (56%) of those surveyed think that mortgage lenders do not do enough to support the self-employed. With only 14% of self-employed workers having consistent income month to month, many feel high street lenders do not give them a fair hearing when going through the application process. The number one reason for a mortgage application rejection for the self-employed was being self-employed, with a third (32%) citing this as a reason for a rejection.

Some lenders want to see evidence that a person's business has returned to pre-pandemic levels -- which is difficult for many as the economy is still recovering. And there are reports that some lenders are turning down applications by anyone who has used the government's self-employment income support scheme.

As a result of these challenges, over a third (37%) of self-employed renters in the UK don't think they will ever be able to purchase a home, and another quarter (28%) think it will take up to ten years or longer to purchase a property under current circumstances.

More than one in ten (13%) are reconsidering being self-employed to improve their chances of getting on the housing ladder.

"The UK is an entrepreneurial nation, and the growing self-employed workforce is integral to our economy, so it is disappointing to see persistent barriers for them when seeking to secure a mortgage, which appears to have been exacerbated by the pandemic," said Jon Cooper, head of mortgage distribution at Aldermore.

"The self-employed need not despair, however, as the growth of specialist lenders has opened up an increasing number of options that can provide pathways to home ownership. Our research shows 52% of the self-employed workers in the UK have seasonal or extremely variable income streams month to month, which may not fit the tick-box approach of many high street lenders, but specialist lenders can dig into the detail to understand complicated income streams ensuring the self-employed have opportunities to get on the housing ladder."