Nearly eight in ten self-employed workers have never missed a payment on their financial commitments, yet many are still penalised when applying for a mortgage, according to new research from Shawbrook.
The bank’s latest Home A-Loan report highlights the ongoing challenges faced by self-employed individuals, a growing and vital part of the UK workforce, as they seek to achieve homeownership.
Among those who have applied for a mortgage, one in three (34%) said they were rejected because their credit score was deemed too low, while 30% cited their income being considered too volatile and 28% said their profession was viewed as irregular or unsteady by lenders.
Although barriers remain, the number of self-employed applicants experiencing rejection has fallen, with 24% saying they have had at least one mortgage application declined compared with 45% last year.
Beyond mortgage access, self-employed respondents identified several key obstacles to buying a home in the next five years.
For first-time buyers, the biggest challenges include high house prices (50%), general affordability pressures and the cost of living (46%), raising a sufficient deposit (38%), and issues related to their self-employed accounts (38%).
Many are also making lifestyle and financial sacrifices to save for a property, with 29% staying in rented accommodation longer than planned, 24% reducing social spending, 14% delaying business expansion, and 21% postponing major life goals.
Steve Griffiths, commercial director for retail mortgages at Shawbrook, said: “Our research clearly highlights the ongoing disconnect between the realities faced by self-employed borrowers and the rigid lending criteria they encounter.
“While it’s encouraging to see mortgage rejection rates falling, the fact remains that millions of creditworthy self-employed individuals are still being excluded from the property market.
“The self-employed are a vital part of the UK economy, and it’s essential that their unique financial profiles are properly recognised.
“With brokers having greater clarity on how specialist lenders can offer tailored solutions, particularly when it comes to understanding annual accounts and cashflow for business owners, self-employed borrowers are better able to navigate the mortgage market with confidence.”
This story was first published in our sister publication Workplace Journal.
