New research from Aldermore bank has revealed that self-employed workers in the UK are pessimistic about their home buying chances, as the pandemic has exacerbated difficulties felt by this group in getting a foot on the housing ladder.

The challenges self employed renters are facing in buying their first home has become more pressing as the pandemic experience has energised many to want to buy a home. One in five (20%) self employed renters say they are more motivated to buy due to the lockdown experience and one quarter (25%) are currently actively saving for a deposit.

However, many now believe that conditions for buying as a self employed worker have worsened. Over a quarter (28%) say saving up for a deposit is more of a challenge now due to the financial impact of the pandemic and one in five (18%) have delayed their home buying timeline due to the pandemic.

Despite over a quarter (27%) of self employed renters now seeking to improve their credit to boost their home buying chances, 14% say their credit score has been negatively impacted due to the pandemic. These increased challenges have meant over a third (36%) of self employed renters say they feel buying a home is unobtainable for them right now. 

While the housing market has rebounded strongly, owing to pent-up demand and Government initiatives such as the Stamp Duty holiday and Mortgage Guarantee Scheme, our research suggests the self employed may be over-looked. While four in five (78%) self employed Brits believe owning a home is an important life step, nearly half (44%) think the home buying process is confusing.

Furthermore, over half (56%) think mortgage lenders do not do enough to support the self-employed. With only 14% of self employed workers having consistent income month to month, many feel high street lenders do not give them a fair hearing when going through the application process. The number one reason for a mortgage application rejection for the self employed was being self-employed, with a third (32%) citing this as a reason for a rejection.

Only a third (29%) of self employed home owners believe mortgage lenders fully understood their earning capabilities when they applied, with half (50%) thinking their lender only understood to a degree and nearly a quarter (21%) say their mortgage lender did not understand their earning capabilities at all. This has led to two-thirds (64%) of the self employed believing mortgage lenders treat self employed people worse than those who are employed with a regular salary.

Jon Cooper, Head of Mortgage Distribution at Aldermore said “The UK is an entrepreneurial nation, and the growing self employed workforce is integral to our economy, so it is disappointing to see persistent barriers for them when seeking to secure a mortgage, which appears to have been exacerbated by the pandemic.”

“The self employed need not despair, however, as the growth of specialist lenders has opened up an increasing number of options that can provide pathways to home ownership. Our research shows 52% of the self employed workers in the UK have seasonal or extremely variable income streams month to month, which may not fit the tick-box approach of many high street lenders, but specialist lenders can dig into the detail to understand complicated income streams ensuring the self employed have opportunities to get on the housing ladder.”