Nearly half – 45% – of non-pay-as-you-earn (PAYE) employees have had a mortgage application declined, a lender’s study found.
Research among 2,000 non-traditional workers carried out by The Mortgage Lender (TML) revealed that 9% who applied for a mortgage had never had an application accepted.
Further, more than a third said they experienced “mixed reactions” to previous applications, with some approved and some declined.
The survey comprised self-employed workers, freelancers and gig economy employees.
It found that of those who were self-employed, sole traders were most likely to have their mortgage application approved, with 65% being accepted. Among those in a partnership structure, 56% had been approved for a mortgage, as had 54% of company directors.
Workers on zero-hours contracts were most likely to have all of their mortgage applications rejected, with this happening to 21% of people in this employment type.
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A majority – 64% – of gig economy and zero-hours contract workers had some or all of their mortgage applications rejected, while the same was said by 63% of contractors.
Hindered by employment type
According to TML’s survey, 30% of respondents whose mortgage application had been rejected said it was because their job was considered “too unsteady or irregular”.
Some 28% said this was down to the “volatile nature” of their income.
This was most likely to be the experience of limited company directors, with 35% experiencing this, and a third of contractors.
People who work in traditional professions such as lawyers and accountants were also potentially rejected for this reason, according to 32% of respondents.
Other reasons for having a mortgage application rejected included having a low credit score, as cited by 27% of respondents, and missed or late payments, as said by 24%.
Some 24% of respondents said they did not have the required documentation, while 22% said the lender did not consider the monthly mortgage payment to be affordable for the applicant.
TML found that people working in technical or craft professions such as mechanics, plumbers, electricians and gardeners were most likely to have their mortgage application rejected, with 15% never having had an approval.
Those in clerical or intermediate occupations such as secretaries, personal assistants, and office clerks were the next likely to be rejected, at 11%.
By comparison, people working in traditional roles such as lawyers, accountants and medical professionals were the most likely to have their mortgage application approved, with 49% having all applications approved.
Sara Palmer, distribution director at TML, said: “It’s very clear that no matter the profession, those who are not ‘traditionally employed’ have a harder journey to access a mortgage. Because these individuals will often have an irregular or more complex income, many lenders may often view them as higher risk and therefore subject them to more stringent affordability assessments. This is despite many of these individuals running successful businesses within the UK that are highly regarded and provide necessary services.
“Indeed, choosing these jobs and careers shouldn’t come with a penalty later on in life when you’re looking to get onto the housing ladder, or remortgage. It’s vital that self-employed individuals have the same opportunity to access a mortgage as those who are employed. At TML, we believe in lending for real life, and have therefore shaped our criteria to better support self-employed and other non-traditional workers to access the mortgages they need.”
