That’s according to a new study which has investigated the barriers faced by the self-employed when applying for a mortgage.
Online mortgage broker, Trussle, said it wants to design innovative products for underserved groups such as the self-employed after it discovered almost three quarters of these borrowers found it harder to get a mortgage.
While many felt their applications were treated differently by lenders, a fifth aged between 25 and 34 said they were putting off having children in a bid to improve the chances of getting an approval.
Indeed, the impact of motherhood appeared to disadvantage self-employed applicants, Trussle’s Mortgage Saver Review discovered.
The study found more than half of these borrowers who felt overlooked or penalised because they were pregnant thought they were treated differently during the mortgage application process.
Maternity leave
One in five in this group felt they had been unreasonably asked for proof about when their maternity leave was due to end and a further 20% thought they had been penalised for not giving the exact date of their return to full-time work.
In contrast, permanently employed mortgage applications only have to confirm verbally to the lender they will return to work permanently on the same terms.
Additional paperwork
Even those who were not pregnant found they had to ‘jump through hoops’ in order to prove they were not a risk to mortgage lenders, said Trussle.
They are typically required to provide additional documents such as SA203 Tax Year Overviews as well as two to three years’ worth of accounts. They must also offer evidence of a stable work history with no gaps in employment over last few years.
The self-employed currently represent a large part of the UK workforce, with 4.85 million people falling into this category, according to figures by The Mortgage Lender. This is expected to rise to 5.5 million by 2022, outnumbering the public sector workforce, the RSA said.
Ishaan Malhi, CEO and founder of Trussle, said: “It’s not good enough. Home ownership should be accessible for everyone. We’re calling on the industry and the Government to work more cohesively to make changes for the better.”
Wasting money
He said the experience of struggling to obtain a mortgage as a self-employed worker was one with which he was familiar.
“I’ve experienced the hurdles that self-employed people face first-hand,” he explained. “Before I founded Trussle, I was itching to get on the property ladder. As a self-employed mortgage applicant, I was treated differently by lenders due to my employment status.
“I wasted hundreds of pounds between various brokers who eventually shut the door in my face. I ended up out of pocket, confused and without a mortgage.”
Now Trussle is attempting to address these difficulties on behalf of self-employed borrowers by calling on the industry and the Government to better support the self-employed.
It has suggested the use of Open Banking to help those with multiple income streams. It also thinks lenders should be more flexible with tax reporting periods and should assess self-employed applicants on their current, not historic, income.
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