Calculated risk: what Gen H data says about newly self-employed borrowers

Self-employment, second jobs and side hustles are becoming a bigger part of how people earn a living, and as they do, brokers are facing non-PAYE challenges. One common scenario: a client whose business is going well, but who hasn’t been trading long enough to meet a lender’s criteria. 

For many years, the default has been to ask these clients to come back when they have more years of accounts. This might’ve been a reasonable measure a few years ago, but in the reality of today’s working world, it’s too blunt. Someone who has left a salaried job to work for themselves in the same field, or who has turned an established side business into their main income, can look riskier on paper than they really are. 

A little while ago at Gen H, we decided to take a closer look at self-employed applicants. We looked at experience in a similar line of work, at the quality of the accounts, and at what the income really looks like, and started making exceptions to our minimum trading length requirements. We wanted to see if more self-employed people would be able to get a mortgage this way, and if that group of loans would perform any differently. 

Over the past two years, the share of self-employed applicants with less than two years’ trading has grown noticeably. Among sole traders it rose from under 3% in 2024 to just over 11% this year, and among limited company directors from around 7% to 13%. 

To see how they performed, we took every self-employed mortgage that had been on our books for at least a year and compared each borrower’s first 12 months with how long they’d been trading when they applied. Borrowers with less than two years’ trading were no more likely to miss a payment than those trading for five years or more. In fact, none of the active loans in that group is currently even one monthly payment behind. 

This reinforces for me one reality of this industry: people want to pay their mortgage.

For most households, the home is the commitment they protect above almost everything else. In this case, self-employed demand has always existed. I am glad that, in accepting these cases, we’ve been able to meet that demand. 

This also serves as a bellwether for all lenders. People want to own homes. What criteria tweaks can we make to help that become possible? 

There are a few points that I want to share with brokers who are wanting to place these cases: 

• Tell us about their history. Relevant experience in the same industry, or a clear move from employment into self-employment in the same field, helps make the case that their income is sustainable. This is what we’ll be looking for.
• Present the accounts clearly. Well-prepared figures form a crucial component of the full affordability picture. Make sure turnover is backed up by business bank statements. If profit has jumped 25% or more, tell us why. If it's dropped or there's been a loss, explain the reason.
• Make the most of BDMs. They're experts in how best to present a case, from the evidence to include to the story behind the numbers. A quick chat before you submit can make all the difference. 

Lending will always involve judgement. Our judgment told us this demand existed and that these buyers weren’t as risky as they might seem. The data so far suggests we were right.