While self-employment offers many opportunities, it is often a challenging activity. It is vital that people moving towards this form of employment understand the pros and cons of doing so. Anyone looking to arrange self-employed mortgages should be aware that many lenders don’t offer favourable rates for self-employed applicants.

In 2019, according to the Annual Population Survey, the self-employment rate in the UK stood at 15%. There had been an increase in the number of people who classify themselves as self-employed over the past decade.

As we move forward, the impact of the pandemic will shape the self-employed mortgage market. Firstly, the self-employed population has been classed as a “particularly vulnerable group” because of the pandemic. This was stated in a study undertaken by the Enterprise Research Center (ERC) in April 2020.

Self-employment mortgages are required

However, with many people being made redundant or seeing their previous employer go bust during the pandemic, many more people will likely be set up as self-employed. The way everyday life has changed, with remote working being commonplace, will probably inspire people to set up as their own boss.

Another interesting issue in the UK in spring 2021 comes with the number of now self-employed gas engineers. A contract dispute has seen around 500 British gas engineers lose their jobs. Social media observers have witnessed many of these professionals announcing the launch of their business, primarily doing the same work, but now under their trading name.

Self-employed professionals face challenges when buying property

So, there are many self-employed people in the UK, and they face several challenges. A recent study indicates close to one-third of self-employed mortgages are unaffordable in 2021.

Some of the highlights of the study are as follows:

  • 71% of self-employed cases in January 2021 were classed as affordable
  • 27% were deemed to be unaffordable when considered on the required loan amount
  • The average maximum loan offered to self-employed professionals was £221,400
  • This is a 3% decrease on the figure offered in August 2020
  • The minimum loan available to self-employed professionals was £118,800
  • This was a 45% increase on the low of April 2020 and a 43% rise on the November 2020 figures
  • 80% of self-employed professionals in Great Britain have been rejected when applying for a mortgage
  • 32.8% of self-employed applicants were rejected as their credit rating was deemed unsatisfactory

David Baird, mortgage and protections advisor at Aventur Wealth, said: “COVID-19 has had a huge impact on self-employed mortgages as we have seen increased discrepancy in the market. From one major lender (Santander) restricting all lending for S/E applicants to 60% (In January – now at 75%) to others carrying on as normal it has caused more confusion for the average buyer. Personally, I have not seen a decline in acceptance rates, instead, it has caused an increase in time taken on my part in researching the right lender for the right applicant.”

How to explore your mortgage options with The Money Hub

Call the Money Hub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.

DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.