Nearly two-thirds of self-employed workers say it is significantly more difficult for them to secure a mortgage than it is for people in employment, new research has found.

According to the survey carried out on behalf of Foundation Home Loans in August, 59% of freelancers believe it takes longer to secure a mortgage because of their status and 51% say there is a restricted choice of lenders available to them.

Furthermore, 60% believe that some lenders do not want to deal with them because they are self-employed.

Only 39% of self-employed workers believe now is now a good time to be a homeowner, compared to almost half 47% of employed respondents.

However, the research also shows there may be a disconnect between perception and reality when it comes to mortgage accessibility, with just 14% of those self-employed individuals saying they had actually been declined a mortgage as a result of being freelance.

Respondents shared their hopes for how they would like lenders to consider their applications.

Self-employed borrowers said they would like lenders to take full account of all their earnings, factor in the entirety of the period that they have been working for themselves, consider each case on its merit and take a more flexible approach.

Freelance borrowers were more likely to use a broker or IFA than those in employment, at 44% compared to 31%. 

Self-employed respondents were also asked to share their financial experiences over the last two years since the onset of Covid. 

Nearly three-quarters reported no negative financial consequences.

Employed borrowers were three times more likely to have fallen behind with loan or credit card payments in the past year than self-employed people.

Only 13% of self-employed respondents said they had taken a government grant or loan.  

However, the research found that freelancers were more likely to report that they had a low credit score and only 42% had checked their credit file.

Self-employed respondents were also more likely to have seen “a big reduction in income” for reasons unrelated to the pandemic over the last 12 months. 

Foundation Home Loans commercial director George Gee says: “What is clear from this exclusive research is we are seeing a disconnect between the perception of self-employed borrowers in terms of what they can secure in the mortgage market, and what might actually be available to them, based on their financial circumstances, their experience over the last 12 months, and their ongoing credit-worthiness.

“There is no doubt, however that for many self-employed, that perception of restricted mortgage choice is indeed accurate post-pandemic: their options have been reduced simply because the way these customers are assessed by some lenders no longer meets what is required in this new landscape of more complex employment and income types. 

“A blanket approach based on a very limited view of borrowers’ recent financials, or an assessment purely based on the sector they work in, cannot give a fair view of their creditworthiness, and it’s because of this that more self-employed borrowers would be better served looking at non-mainstream routes.

“However, there is a lot to be positive about here, particularly in terms of the strength of the financials of these self-employed existing, and prospective, homeowners; the majority have not endured negative financial experiences since the onset of the pandemic, and only a small number are being declined for mortgages.

“There are some key messages we need to get across to the self-employed borrower base though and they involve outlining that not all lenders approach them in the same way. 

“There are many calls for flexibility and to be treated as individual cases not a homogenised group, and that’s certainly the way we work with the self-employed at Foundation, trying to understand their individual circumstances, taking into account various income sources, their current situation and recent history to ensure we are able to provide a fully-rounded decision on their mortgage affordability, so these borrowers get the mortgages they require.

“This research also stresses the ongoing need for adviser intervention, and for us as an industry to continue to direct the self-employed down the advice channel because by doing this they will have a much better chance of securing mortgage finance, and their customer experience will be greatly enhanced.”

The research, carried out by BVA BDRC on behalf of Foundation, interviewed 300 individuals in August.