Self employed to get help with mortgages

Monday 6 October 2014

Self employed professionals are set to get help with acquiring a mortgage, which has often proved to be a pain point for them in the past.

A number of lenders, including bigger ones like Halifax and specialist providers such as Kensington, Precise mortgages and Principality have begun accepting umbrella company contractors and sole traders with only a year's worth of accounts.

Indeed, getting a mortgage has often been troublesome for self employed people due to tough lending criteria. This was strengthened upon the introduction of the Mortgage Market Review in April.

The majority of lenders said that they wished to see at least three years' worth of earnings history. For contractors, this meant that they had to prove that they had a contract running that had at least six months left on it as well as a two-year track record.

However, Clydesdale said that it is prepared to look at previous employment history in place of the two-year track record for working as a contractor.

Statistics show that a number of self employed professionals have been locked out of getting a mortgage. For example, research from Kensington found that close to one quarter of people who have been self employed for at least 12 months have been unable to obtain a mortgage.

It found that 24 per cent of the population of self employed professionals could not get a mortgage from particular lenders, while ten per cent were completely unable to secure a mortgage.

This struggle was also found to be more prominent among men than women as 37 per cent of males have been self employed, compared to 22 per cent of women. The areas where people are most likely to work for themselves in the UK are Scotland, London and Eastern England.

Head of Kensington Keith Street said: "It’s very clear from our research that not only are the self-employed the fastest growing part of the UK workforce, but that the prospect of being refused a mortgage is a real threat and understandable concern for them."

The research found that 11 per cent of self employed people were concerned about being able to acquire a residential loan. This comes after their fears of finding new business and keeping their cash flow in order.

During the Labour party's annual conference, the ability for self employed professionals to gain a mortgage was touched upon. The party's leader Ed Miliband pledged that he would tackle issues that trouble self employed professionals, such as acquiring mortgages and arranging pensions, should Labour be voted in during the next election. He described the struggle among self employed professionals as 21st century discrimination.

Mr Miliband said that the near five million people who are self employed deserve a fair shot at getting finance and supporting themselves for the future.

Indeed, the most recent figures from the Office for National Statistics show that 4.6 million are self employed, which represents 15 per cent of the workforce in the UK. Not only is this the highest proportion of people working in this way since records began but it is also the fastest growing segment of the working population.

By Victoria McDonnell

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