Self-employed left out in the cold (not just by the British weather)

A survey from Saffron Building Society has highlighted that nearly half of self-employed (49%) said they wouldn’t feel confident finding a suitable mortgage lender that would offer a product to meet their needs. Saffron’s flexible criteria and approach to underwriting seek to address this.

Over 4 million people in the UK are self-employed. While they’ve achieved professional independence, for many that similar independent feeling that homeownership brings seems out of reach. This has been a concern for us at Saffron Building Society and our broker partners. Since 2020, the self-employed have seen increasing challenges when applying for a mortgage, and the ‘one size fits all approach’ of larger lenders saw the viability and accessibility of mortgages decrease.

There hasn’t been much hope on the horizon at a market level, as the Mortgage Broker Tools (MBT) Affordability Index^[1] identified that a third of all self-employed applications did not pass the lenders affordability criteria. Following the turmoil of recent years, with the pandemic and a continuously unstable economy, the two to three years of accounts typically requested on application unsurprisingly became a devastating hurdle for the self-employed.

Other lenders shy away from complex cases, but at Saffron, we embrace what’s different, we

champion those with complex needs or incomes – like the self-employed. Last year, we carried out an independent survey with 1,000 self-employed respondents to better understand their situation.

Nearly half (49%) admitted they wouldn’t feel confident finding a suitable mortgage lender that would offer a product suited to their needs, whilst still passing affordability and only 1 in 5 (19%) believed that there was a good choice of lenders offering products for the self-employed. As a caveat, these statistics may seem shocking, but it is worth remembering many of the respondents may not yet have engaged with a broker. But it also highlights that we need to be marketing directly to them - in collaboration as brokers and lenders - to ensure self-employed borrowers know that there are specialist products available to them. For example, websites making it clear that brokers have access to products and solutions solely for them?

At Saffron, we try to unlock more opportunities for your self-employed customers with more than just our products. We have applied an even more flexible, case-by-case approach to self-employed lending. On our self-employed product we calculate affordability on just one year’s accounts, can accept most recent year’s income even if there has been a significant uplift (alongside acceptable projections for the future), and our income assessment can be made on profits not just dividends. These are just some examples of our criteria.  Going even further, we have considered how we can support the self-employed at different stages on their homebuying journey, for example; offering our self-employed product to those who are first time buyers, and using our discretion to utilise passive income from a business for a retired applicant.

Our human underwriting approach also serves these complex borrowers far better. It allows us to make nuanced decisions based on individual circumstances, providing a level of flexibility and understanding that automated systems cannot match, giving another level of comfort beyond our criteria itself.

We understand that navigating these complex cases can feel like a daunting task for a broker, so our expert Business Development Team can help you get application-ready, and our underwriting approach also includes communication from the underwriter direct to the broker (for instance where the case is particularly complicated) to discuss next steps and perhaps guide the broker through the decision – and this has been welcomed by our partners.

Whilst we can’t do anything about the British weather, we can help support these underserved groups like the self-employed by embracing different. To find out more about our self-employed products and criteria visit www.saffronforintermediaries.co.uk. To hear first-hand from a broker who’s self-employed case benefitted from our highly-trained Business Development Team and human underwriting approach, listen to our podcast SFI not so Live here https://podcasts.apple.com/gb/podcast/sfi-not-so-live/id1577546873.

[1] https://www.mortgagestrategy.co.uk/news/self-employed-mortgage-affordability-drops-to-record-lows-mbt/

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