Self-employed workers continue to face significant hurdles when applying for mortgages, despite the majority demonstrating strong financial reliability, new research from Shawbrook reveals.
According to the lender’s latest Home A-Loan report, nearly eight in ten (79%) self-employed people never miss a payment on their financial commitments.
Yet many still struggle to access mortgages, with one in three (34%) citing rejection due to a credit score deemed insufficient.
A further 30% said their income was considered too volatile, while 28% reported that lenders viewed their profession as too irregular or unstable.
The findings highlight a persistent disconnect between the financial track record of self-employed borrowers and the risk assessments used by mainstream lenders.
SIGNS OF PROGESS
However, the data also shows some signs of progress: just under a quarter (24%) of self-employed applicants said they had at least one mortgage application declined in the past year – a sharp improvement from 45% in 2024.
The self-employed sector, which now accounts for around 4.3 million people in the UK, remains a vital component of the national economy.
Yet Shawbrook’s report suggests that many are still delaying key milestones because of barriers to homeownership.
Among those hoping to buy a property within the next five years, 50% cited high house prices as the biggest obstacle, followed by affordability pressures linked to the cost of living (46%).
Raising a sufficient deposit (38%) and concerns over how lenders interpret their accounts (38%) were also common challenges.
To manage these difficulties, almost a third (29%) said they had remained in rented accommodation longer than intended, while 24% had cut back on their social life and 14% had postponed business expansion plans. One in five (21%) admitted to delaying other major life goals to save for a home.
RIGID LENDING CRITERIA
Steve Griffiths, Commercial Director for Retail Mortgages at Shawbrook, said: “Our research clearly highlights the ongoing disconnect between the realities faced by self-employed borrowers and the rigid lending criteria they encounter.
“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.”
And he added: “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.”
UNDERWRITING REFORM
Industry analysts say the findings underline the need for continued reform in mortgage underwriting to reflect the financial realities of Britain’s growing freelance and small business workforce.
Despite steady progress in specialist lending, many mainstream lenders continue to rely on outdated affordability models that fail to account for the irregular income patterns common among self-employed applicants.
While rejection rates are falling, Shawbrook’s data suggests that unlocking broader access to mortgages for self-employed buyers will require both lenders and brokers to adapt their criteria and embrace more flexible, data-driven assessments.
