Precise has been on a very vocal campaign during the past 12 months on this subject and Kensington has been hot on their heels with its own promotion, including advertising on Talk Sport. So, what’s all the fuss about?
Data produced by ONS shows there are over 4.6m self-employed people in the UK, which is 15% of the workforce. This stat alone shows why the self-employed market is important; but stopping here would not make for a very interesting blog! Why would any lender knowingly exclude itself from 15% of the potential population? All will state they are not, but a quick glance at their criteria shows they are being a little selective.
MMR has been used as a starting point for why the self-employed are underserved. However, this neglect is not new; it has always been this way. One of the reasons specialist lending started in the 1980s was to try and cater for a market that was not classed as ‘mainstream’. I think we’ve never truly found the right balance.
Here’s an example that I use regularly with lenders; an entrepreneur sets ups a new company and employs three staff. Many lenders will potentially offer a mortgage to the three employees from day one, if in a similar occupation, or six months at the very most. However, the owner could have to wait two years on average. The large disparity in outlook seems nonsensical to me. If the firm does not perform as well as expected in the short term, the employed staff will be made redundant first; yet they are the ones with the mortgage.
I am sure it is not this clear cut, but the concept is fair and the opportunities offered to self-employed applicants needs to be closer to that of an employed applicant. So, congratulations to Precise and Kensington - plus stalwarts, Halifax - for looking at ways in which they can help to bridge this gap; but should this not be the norm? The challenge to the other lenders is when they will change their criteria to at least start to move towards parity.
A final piece of data to ponder on; there arenearly 500,000 over 65s now self-employed, which has doubled in the past five years. So we have a combination of a self-employed applicant needing lending into retirement criteria. Now that is a conundrum for lenders to cogitate over!
