Getting a mortgage as a self-employed worker is so tough that 40% of freelancers give up on self-employment in order to get on the property ladder, according to new research.
Data from latest First Time Buyer Index published by Aldermore Bank reveals that a staggering 40% of freelance first-time buyers have given up being self-employed to ensure they could secure their mortgage repayments.
The findings also show that first-time buyers who are self-employed are twice as likely to have been rejected for a mortgage by their bank (39% compared with 20% national average).
Nearly one in five prospective buyers (19%) who have been rejected for a mortgage were declined due to either being self-employed, having an irregular income or being a contract worker.
However, despite the struggles, 88% of self-employed first-time buyers that have made it onto the housing ladder say they are happy to no longer be spending money on rent.
Jon Cooper, director of mortgages at Aldermore, said: "The homebuying process is difficult enough but even more so for those who don't fit the standard profiles of some high street lenders. For those who are self-employed, contract workers or those with irregular income, getting a foot on to the property ladder often comes with more hurdles and setbacks, which can be disheartening.
"It's concerning many first-time buyers are giving up being self-employed in order to get on the property ladder. Entrepreneurship is key to our economy, and we shouldn't penalise borrowers on this basis. It's a positive that over recent years, we've seen more lenders willing to be more flexible."
Freelancers struggle to get on property ladder
New research from The Mortgage Lender (TML) also shows that 50% of "non-traditional workers" have found their employment status has negatively impacted their ambitions to buy a property in some way. Of these:
- 70% are gig economy workers;
- 68% are contractors;
- 60% are contract workers;
- 57% are freelancers
- 43% are self-employed workers.
Overall, 20% of those affected say the biggest barrier is their fluctuating income. As a result, individuals have had to rent for longer than they'd have liked (15%) and some have had to consider abandoning their home ownership ambitions (17%).
"It can be incredibly disheartening to have core life ambitions, like owning your own home, be put on hold due to your employment status. Especially, as with some lenders, this element of the lending criteria process can be a tick box exercise when, in reality, non-traditional earners could often be making commensurate, if not higher, annual incomes than employed applicants." Sara Palmer, distribution director at The Mortgage Lender.
TML's survey of 2,000 self-employed workers has found that almost half of those that had applied for a mortgage in the past have had their application rejected. In fact, nearly one in ten non-PAYE workers who have applied for a mortgage have never had an application accepted.
Written by Rachel Miller.
