72% of business owners believe self-employment makes it harder to get a mortgage according to Pepper Money’s latest Specialist Lending Study.

Within this cohort, 46% think self-employment makes it “a lot more difficult” to successfully secure a home loan.

Pepper also found that 29% of self-employed people say they made at least 10% more profit in the last year compared to the preceding two years, and 15% say they have made at least 20% more profit in the last year.

“this often comes down to proving affordability”

Ryan Brailsford, director of business development at Pepper Money, said: “The Pepper Money Specialist Lending Study has found that self-employment continues to be seen as a significant challenge when it comes to getting a mortgage, and this often comes down to proving affordability.

“Many lenders will base affordability calculations for self-employed customers on an average of their last three years’ submitted accounts, yet our research shows that nearly a third of business owners have increased their income by at least 10% over the last 12 months.

“Similarly, there are often occasions where a limited company director may decide to retain some of the net profit within the business instead of paying it all as dividends. This can help reduce their personal tax liability, but it also limits their borrowing power when applying for a mortgage.

“By working with a lender, like Pepper Money, that can make affordability calculations based on one year’s accounts, or even consider retained net profit as part of the calculation, brokers can help to maximise the affordability of their self-employed customers and increase their opportunity.”

“a growing number of lenders… take a more progressive approach”

Adam Hinder, CEO of Simply Lending, added: “Traditionally lenders have taken a rigid approach to underwriting self-employed income, so it’s perhaps unsurprising that so many self-employed people think securing a mortgage is going to be such a challenge.

“However, a growing number of lenders, like Pepper Money, take a more progressive approach, with criteria that can consider affordability on the latest year’s accounts or profit retained within the business, coupled with hands-on underwriting that gives proper consideration to a customer’s individual circumstances.

“This is helping to open up more opportunities for the self-employed and, as brokers, it gives us the chance to help more customers secure the mortgage they deserve.”