The majority of self-employed workers would switch to a salaried job to get a mortgage, latest research from Afin Bank reveals, with three quarters willing to give up working for themselves to make their financial lives easier.
One in four self-employed workers believe they have been turned down for a mortgage for reasons such as fluctuating earnings and multiple income streams while over a quarter (26%) of self-employed workers believe they have been turned down for a mortgage because of factors linked to their employment status.
Three quarters (75%) of workers said they were either currently thinking about or would consider switching to salary-based employment to overcome the challenges of getting a mortgage.
HOLDING BACK
The survey of 500 self-employed workers also found 38% believe their self-employed status had stopped them purchasing a new home; 23% said their unpredictable earnings or fluctuating income had been a barrier to getting a mortgage; 13% said insufficient proof of earnings or not enough years of accounts had stopped them getting a mortgage; 13% of self-employed workers said an insufficient credit history had stopped them getting a mortgage and 9% of respondents believed they had been turned down for a mortgage because the lender would not accept multiple income streams.
DIFFICULT PROCESS
Even among those self-employed workers that have a home loan, nearly a third (30%) say the process had been difficult, but they had eventually secured a mortgage.
These struggles led to more than eight out of ten (86%) of those surveyed by Afin Bank feeling they are an underserved community when it comes to banking, mortgages and financial services in the UK.
Afin Bank said its research shows a worrying trend of lenders not keeping up with the shifting trends of self-employment in the UK, which has changed in part due to the impact of COVID.
PATCHY SUPPORT
James Briggs, Intermediaries Sales Director at Afin Bank, said: “While a lot of lenders claim to serve the self-employed, our research shows that support is patchy and difficult, to the point that a majority would consider returning to a salary-paying role to make it easier to get a mortgage.
“The definition of self-employment is evolving because of changes in working practices since COVID or because of uncertainty in the employment market. We have seen an increase in people on contracts, freelancing or with portfolio jobs managing multiple income streams.”
Briggs added: “We want to support as many self-employed people as possible, so we don’t use a tick box approach and instead work to understand their circumstances to provide them with suitable mortgages.”
GROWING MARKET
Afin Bank pointed to data showing that the number of people working for themselves is continuing to grow following a decline from 2020 to 2021during the peak of COVID, with almost 4.4 million self-employed workers in the UK at the end of Q2 this year.
Afin Bank launched in the summer with a range of residential and buy-to-let mortgages designed for customers that are poorly served by high street banks, such as the self-employed and foreign nationals living and working in the UK.
The bank is backed by parent company WAICA Reinsurance Corporation Plc (WAICA Re), one of the largest reinsurance companies in Africa, which has committed £62m to launch the bank.
