The self-employed market is expected to grow significantly in the next five years to £34.8bn, presenting an opportunity for specialist lenders.
Speaking on a video debate, Maeve Ward, head of intermediary sales for personal finance at Together, said the self-employed market was estimated to be around £20.9bn in 2023, and as these borrowers tend to be “under-served” by the high street, it is an “opportunity for further growth” for the specialist lending market.
Ward said that, “more often than not”, borrowers will now have a “sideline, separate gig or some form of self-employed”.
This is partially due to the cost-of-living crisis, along with changing behaviours and borrower needs.
Nick Parker, head of networks and clubs at Together, said there could be “unknown factors” with self-employed income and earnings, as they can fluctuate.
“It’s very difficult for high street lenders that rely on algorithms and rely on [a] series of rules to be able to apply those rules successfully to that type of [gig] economy and work out whether or not there is a propensity to default, or whether it has… long-term sustainability,” he said.
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Paul Zammit, The Loans Engine’s CEO, said it often got brokers coming to it with self-employed cases for which they have tried mainstream lenders and they “can’t get comfortable with the deal”.
However, specialist lenders take a more “holistic view” of the self-employed market, as “it is not just focusing on the income”.
“They’ll be looking at the client’s profile from the point of view of credit history, equity, of course, [a] big factor when it comes to risk appetite, general lifestyle, etc, on an affordability basis, so income is just one part of that jigsaw,” he said.
Greg Cunnington, head of strategic accounts at Legal and General Mortgage Club, said more self-employed borrowers “fall into the specialist category”, but that was due to “complexity of client scenarios hitting the desk” rather than restricted lender appetite.
“If I go back to my kind of early years advising, you would quite often do three cases a week [that] were three times income, 25% deposit and off you go. They didn’t exist towards the end, every single case was needing to push the income profile, or had two jobs on elements of self-employment, and it’s just become part and parcel of… people’s remuneration and how things work,” he said.
Watch the 13:08 video, chaired by Samantha Partington, freelance journalist for Mortgage Solutions, with speakers including Maeve Ward, head of intermediary sales for personal finance at Together, Nick Parker, head of networks and clubs at Together, Paul Zammit, The Loans Engine’s CEO, and Greg Cunnington, head of strategic accounts at Legal and General Mortgage Club.
