Executive Summary

  • Research carried out by IPSE has shown that self-employed workers looking to obtain a mortgage are concerned that tough eligibility criteria may mean they will never be able to get one
  • Recently introduced rules toughening lending criteria has made it much harder for self-employed workers including freleancers and limited company contractors to gain mortgages
  • However, the Government has announced a review looking to specifically help the self-employed, particularly around mortgages, maternity pay and pensions

What are the issues?

  • Lenders not Lending:
    • IPSE research has found that 45% of IPSE members think mortgage providers don’t want them as customers
  • Lack of Confidence:
    • 38% of self-employed people believe they could not get a mortgage if they want to
    • 61% think mortgages advisors do not understand their financial situation
  • Tough Criteria:
    • 63% of microbusiness owners think the self-employed have to jump through more hoops than “traditional” employees
    • As a results of the 2014 Mortgage Market Review, lenders are only allowed to grant interest-only loans where there is a credible strategy for repaying the capital - insist on three years’ worth of earnings history

What are the effects?

  • Hampering self-employed:
    • Creditworthy borrowers with “unusual circumstances” are overlooked by mainstream mortgage lenders
    • Freelancers and the self-employed have become known as “mortgage misfits”, with some advisers unwilling to take them on as clients or to offer competitive deals
  • Lack of Progress:
    • Tough lending rules will mean freelancers will find it harder to start or progress along the property ladder
    • This is particularly concerning given the rapid growth in self-employment and the large numbers of young self-employed workers (18-25) who intend to remain self-employed for most of their careers

IPSE’s policy on mortgages

  • Advice:
    • Lenders need to learn more about the circumstances of the self-employed
    • IPSE is calling for mortgage advisers to be given better advice on independent working
  • Review:
    • Feed into the outcome of the Government’s report into Mortgages, Maternity Pay and Pensions for the self-employed in order to shape what any policy proposals eventually look like

What will success look like?

  • Government will recognise the unique financial challenges faced by the self-employed and work with representatives like IPSE, lenders and regulators, to encourage the development of more flexible financial solutions, including mortgages
  • The self-employed, freelancers and contractors should have the same level of choice and access to the mortgage market as any other group, seen through a appropriate consideration given to their needs as part of the “Mortgage Market Review”
  • Mainstream, high street lenders, should actively seek out contractor business by offering competitive deals