Many self-employed borrowers still face rejection despite financial stability
A significant proportion of self-employed workers in the UK continue to encounter difficulties securing mortgages, despite the majority maintaining a strong record of meeting financial obligations, according to new research from property lender Shawbrook.
The lender’s Home A-Loan report reveals that while 79% of self-employed individuals have never missed a payment on their financial commitments, many still face rejection when applying for a mortgage. Among those who have applied, 34% reported being turned down due to insufficient credit scores. Another 30% cited concerns over income volatility, and 28% said lenders viewed their profession as too irregular or unstable.
The data does indicate some progress. The proportion of self-employed applicants experiencing at least one mortgage rejection has fallen to 24%, a notable decrease from 45% the previous year. This suggests lenders may be gradually adjusting their criteria, though significant challenges remain for this segment of the workforce.
For those aiming to purchase their first home, the main obstacles identified were high property prices (50%), overall affordability and the rising costs of living (46%), difficulties in saving for a sufficient deposit (38%), and issues related to self-employment accounts (38%).
The research also highlights the personal and financial adjustments made by self-employed individuals in pursuit of homeownership. Nearly three in 10 (29%) have extended their time renting, 24% have reduced spending on social activities, 14% have postponed business expansion, and 21% have delayed other major life milestones.
“Our research clearly highlights the ongoing disconnect between the realities faced by self-employed borrowers and the rigid lending criteria they encounter,” said Steve Griffiths (pictured right), commercial director for retail mortgages at Shawbrook.
“While it’s encouraging to see mortgage rejection rates falling, the fact remains that millions of creditworthy self-employed individuals are still being excluded from the property market.
“The self-employed are a vital part of the UK economy, and it’s essential that their unique financial profiles are properly recognised. With brokers having greater clarity on how specialist lenders can offer tailored solutions, particularly when it comes to understanding annual accounts and cashflow for business owners, self-employed borrowers are better able to navigate the mortgage market with confidence.”
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