Four out of ten first-time buyers have relinquished their self-employment status to secure mortgage repayments, according to Aldermore’s latest report.
- Twice as many self-employed individuals are rejected for mortgages compared to the national average.
- Nearly 20% faced mortgage rejections due to irregular income or contract work.
- While challenging, 88% of self-employed buyers are pleased with their transition to homeowners.
- Jon Cooper of Aldermore highlights the need for flexible lending for self-employed individuals.
In a significant finding by Aldermore, it has been revealed that four out of ten first-time buyers opted to give up their status as self-employed to better secure mortgage repayments. This trend outlines the challenging landscape faced by self-employed individuals in the housing market. The conversion from self-employment to other employment forms appears as a strategic move to overcome financial obstacles.
The research indicates a disproportionate rejection rate for mortgages among the self-employed, with these individuals facing denial at double the national average. Specifically, 39% of self-employed buyers were turned down by banks, highlighting the financial discrimination inherent within the traditional lending apparatus. This figure starkly contrasts with the 20% refusal rate experienced more broadly across first-time buyers.
Almost one-fifth of prospective homebuyers find themselves rejected due to factors such as irregular income or being engaged in contract work. These employment inconsistencies often result in financial profiles that do not align with the stringent requirements imposed by many lenders, further complicating the path to homeownership for a significant portion of the self-employed.
Despite these adversities, an overwhelming 88% of those who transitioned away from self-employment report satisfaction with their decision, primarily due to the relief of no longer having to allocate substantial funds towards rent. This shift underscores the high demand for stable housing and the willingness of individuals to alter their professional lives to achieve this stability.
Jon Cooper, director of mortgages at Aldermore, underscores the complexities involved in the homebuying process for those outside traditional employment norms. Cooper advocates for a lending environment that values entrepreneurial spirit without penalising potential buyers for non-standard income streams. He emphasises that Aldermore’s human underwriting approach allows a more nuanced understanding of a borrower’s finances, thereby facilitating greater access to homeownership for self-employed individuals.
The ongoing challenges faced by self-employed individuals in the mortgage market underscore the necessity for adaptable lending practices.
