"78% of new home buyers are unaware that specialists brokers exist at all."
The number of self-employed workers alone rose from 3.3 million in 2007 to 4.8 million by 2017, while the number of zero hours contracts grew to 1.8 million in 2017.
Freelancers and entrepreneurs are two of the personas identified in Online Mortgage Advisor’s latest research report who come up against barriers when looking to buy a home, despite falling into the 'new normal home buyer' group.
Entrepreneurs may have achieved several years’ growth in their business, but the decision to reinvest profits rather than taking them as earnings can damage mortgage applications. Similarly, freelance workers can often earn the same or more than full-time employees despite their income varying from month to month. Workers that are new to self-employment can also be caught out, as most mortgage providers require two- or three-years’ worth of accounts as proof of income.
OMA’s research found that many people outside of traditional full-time employment were asked to provide extra proof of future income for their mortgage. When it comes to actually getting a mortgage, it seems that much of the market has not kept up with changes in UK life – and is failing to serve a significant proportion of first-time buyers as a result.
New normal home buyers typically have a good credit status with 48% claiming they have a good credit history and 22% rarely missing a payment. However, traditional lenders are not keeping pace with this change. Nearly one in ten (9%) new normal home buyers couldn’t find a mortgage at all, this figure rises to 16% of freelancers and 28% of people on zero hours contract.
Equally, there are many people who find that their credit history puts them in a tricky position when it comes to getting a mortgage. It’s not unusual for people to be without a normal credit history, either due to inadequate financial education, unwise spending behaviour in the past or simply a lack of previous borrowing.
Entrepreneurs who use their personal credit to support their business can often run into problems with their rating, even as their salary and profits increase. In years gone by, these factors have prevented people from accessing a mortgage. These growing groups have been overlooked and arguably let down by the mortgage market for too long.
Looking more generally, OMA’s research found that 34% of new home buyers feel at a disadvantage to other first-time-buyers with 43% saying that lenders don’t reflect contemporary society or urban working trends.
There’s also a knowledge gap that needs to be filled, with only 12% of new home buyers stating that they have spoken to a mortgage broker specialising in their specific circumstances. Additionally, 78% of new home buyers are unaware that specialists brokers exist at all.
Armed with financial advice and mortgage options tailored to their circumstances, we’re confident that new normal home buyers will be able to find the right deal – and right home – for them.
