The self-employed mortgage market is projected to rise by 67% over the next five years to £34.8bn, a specialist lender suggested.
The Together Residential Property Market Report found that the self-employed workforce increased from 3.2 million to 4.3 million people over 20 years.
A further 183,000 people joined the self-employed population in the first quarter of this year, which Together said highlighted the need to support these workers in accessing finance.
Research from Together found that more than a fifth – 22% – of rejected mortgage applicants were considered ‘non-standard’ because they were self-employed. A tenth said they were rejected because they had “sporadic income”.
Just 5% of self-employed mortgage applicants said they had successfully got a mortgage in the last year.
Together said changing work and lifestyle patterns meant the number of self-employed workers would rise in the future. It said there had already been an increase in the demographic from April to June this year, also reflected in the volume of enquiries submitted to Together.
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The lender said this also matched a wider trend of rising numbers of homeowners and potential homeowners with ‘non-standard’ circumstances.
Some 29% of people who responded to its research said more flexibility around mortgage repayments was needed, such as the ability to underpay or overpay. A further 14% said it would help if lenders standardised the definition of and criteria for non-standard applicants.
John Barker, chief executive of personal finance at Together, said: “During economic downturns, the tendency of mainstream lenders to reassess their strategies will lead to an environment that is more cautious or risk-averse.
“In turn, this will always be more favourable to employed borrowers with perfect credit histories over, say, lending to the self-employed or those with past credit blemishes – even where the latter can put down a larger deposit.”
He added: “Bespoke, non-automated underwriting utilised by specialist lenders takes account of such issues and allows a funding decision to be made on a more holistic view of the borrower’s financial circumstances.
“And as more and more people find themselves to be a sole trader, freelancer, side hustler or majority shareholder, a more inclusive approach is required from the financial services industry where common sense is applied to lending with applications judged on merit – looking at the whole picture, not just your credit score or loan-to-income ratio.”
