Self-employed people must not be locked out of future mortgage borrowing
11 May 2020
The latest UK Finance data shows the extent of the Covid-19 pandemic hitting the mortgage market with one in seven mortgage holders having been granted a three-month grace period by the 28 April.
While the data has not been broken down in this way – yet – it would be interesting to see how many of those borrowers securing a payment break were self-employed and how many requested their holiday while the government was still coming up with its self-employed income support scheme?
You will recall it took roughly a week longer to develop a scheme designed to provide parity between the employed and self-employed, although there has still been criticism that there are large numbers of the latter group who will not be eligible for the support.
Fears for finances
As might be expected there tends to be a greater level of complication here for the self-employed, and this is not just the case when it comes to their tax affairs, their income, the way they are paid, or indeed the route by which government can provide greater levels of support.
It is also there in the ways and means by which they borrow and how they are accepted for loans and mortgages.
So it is perhaps not surprising the Association of Independent Professionals and the Self-Employed found almost half of those self-employed people it questioned said they feared not having enough money to cover basic costs such as rent or mortgages and bills.
And two-thirds were worried they would burn through all their savings in the next three months, a similar number to those who had seen demand for their work dropping since the crisis started.
Future mortgage availability
For the self-employed who own their own home, this is not just about the present with regards to ongoing mortgage payments, but how they might be viewed in the future when looking for further mortgage finance.
The big question is, how will lenders review a self-employed person’s 2020/21 income in light of Covid-19, especially if it might look considerable out of step with previous years?
Over the past few years, many specialist lenders have excelled within this part of the market, broadening their offerings, accepting a wider range of self-employed borrowers, and having a flexibility to their criteria which matches the working practices of large numbers of workers.
In the immediate aftermath of the coronavirus, that lending approach is unlikely to be there and it may take many months before we return to anything like the levels of criteria, pricing and underwriting we have come to expect.
Will that specialist lending gap be filled, or can specialist lenders themselves return to market quicker than anticipated?
Do not step back
Perhaps these are conversations for the future, but they will certainly need to be had if we are to ensure that self-employed borrowers are treated fairly and continue to be able to secure their mortgages in the future.
Advisers clearly have a role to play here in terms of leading their self-employed clients through not just this period but into whatever environment follows.
And we will all have to ensure that the great strides that have been made in the area of self-employed mortgage lending in the past few years are not lost.
Maintaining mortgage payments might be the priority now, but maintaining product options and flexible criteria will also be a necessity in the future.
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