Homebuying in the pandemic: over half of freelancers feel they are penalised for being self-employed

New research by IPSE and CMME shows that over half of all freelancers (59%) feel they are being penalised for being self-employed when trying to get a mortgage.

The financial uncertainty of the pandemic is believed to be making it more difficult for freelancers to get on the housing ladder. Of those who are not homeowners and are not planning to buy, one in four (25%) said the main reason was worries about the pandemic. Another one in five (20%) said the reason was they had used up all their savings to get by in the pandemic.

Overall, nearly all freelancers (90%) said they were worried about the financial impact of the pandemic, while over two-thirds (70%) said they are also worried about the impact of the changes to IR35 self-employed taxes. (Among limited company directors, who are more likely to be affected, this rose to 88%, with 75% saying they are ‘very worried’).

Financial uncertainty is also affecting freelancers who are planning to buy a home in the next five years. In this group, almost two thirds (63%) said they are concerned about the state of the UK housing market (compared to 35% across all freelancers). Three quarters (75%) said they were worried they would not have the job security to get a mortgage, while three-fifths (60%) said they were concerned they simply would not be able to afford a mortgage. In this group, over three quarters (77%) were also worried getting a mortgage will be more difficult because of their self-employed status.

Of those freelancers who had already got a mortgage, one in four (25%) said it had been somewhat or very difficult – and of these, almost all (96%) said the main reason was that they had had to provide more paperwork because they were self-employed. Worryingly, over two-thirds (70%) also said that some lenders simply would not consider them because of their self-employed status.

More positively, however, over half (56%) of freelancers who had already got a mortgage said the process had been somewhat or very easy. This may reflect the fact that although there is uncertainty about how to get a mortgage (49% of those planning to buy in the next five years said they did not understand the steps to get a mortgage), many freelancers are turning to mortgage brokers. Nearly two-thirds (65%) of those who planned to use a broker find a mortgage believed they were helpful for getting self-employed people better rates, while two-fifths (42%) said it was easier than going directly to a lender.

Chloé Jepps, Head of Research at IPSE (the Association of Independent Professionals and the Self-Employed), said: “Getting a mortgage has always been more of a challenge for freelancers, but in the pandemic – the financial impact of which has disproportionately hit the self-employed – it is more difficult than ever.

“In the context of the pandemic, a significant proportion of freelancers are not considering buying a home at all – either because of the sheer financial uncertainty, or because they have lost so much of their savings.

“With extreme financial anxiety across the self-employed sector, as well as widespread reports of lenders unfairly adding to the obstacles facing freelancers who want to get on the housing market, it’s clear the sector needs more support from government. Without intervention, there is a risk many thousands of freelancers will have to put their house-buying plans on ice for years to come – or even give up on the dream of home-owning altogether.”

Mike Coshott, CEO at CMME Mortgages for Independent Professionals, said: “With the difficulty facing self-employed professionals and freelancers as a result of the pandemic, getting a mortgage shouldn’t be an additional hurdle. CMME believes the way people choose to work should not limit their choices in life; Historically, this sector – which makes up some 15% of the UK’s workforce – has faced continued challenges when it comes to securing a mortgage. According to the research CMME has conducted in partnership with IPSE, 1 in 4 self-employed professionals  have experienced difficulty getting a mortgage, as traditional  lenders have struggled to assess their true borrowing power, often resulting in them lending less, offering a poor deal or simply saying no.

“Having spent the last 16 years working directly with banks and building societies to change the way they view people who choose to work independently, this research will be invaluable in furthering the solutions we have already developed for independent professionals. In doing so, we hope to continue our work in changing the risk appetite and lending criteria for the self-employed in order that this invaluable sector of society gain access to the mortgages they deserve.

“As 2021 unfolds, vaccines develop and the world looks to the future calm-after-the-storm, we hope that the self-employed sector will see more mortgage equality on the horizon.”

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