Nine out of ten brokers say lenders have tightened loan rules for self-employed applicants, according to a poll by United Trust Bank, even though this group is a growing part of the workforce.  

The specialist bank claims 91% of mortgage brokers it surveyed say “mainstream lenders had tightened their criteria for self-employed applicants”, in its new white paper called ‘Growing opportunities for brokers in the specialist mortgage market’.  

Intermediaries add that customers with complex incomes – such as self-employed, sole traders or those with multiple income sources — “are a group which will continue to grow and that having lenders sufficiently skilled-up and with an appetite to cater for these customers is vital”.  

The number of self-employed workers edged up 0.1% to 13% of the UK workforce, or just over 4.2 million people, from last December to March, in the latest Office for National Statistics data.   

The study points out that 88% of mortgage brokers believe that self-employed customers who took advantage of the broad range of local authority and central government legitimate pandemic small business grants “are being marginalised by mainstream mortgage lenders”.  

Brokers said many lenders struggled to “take a view” on clients who used these grants and that they should have been able to apply an objective assessment of the impact that the lockdowns had had on certain, previously successful businesses.  

Advisers agree the key factors separating mainstream from specialist cases centre around income, credit history, credit score, loan size and property type.  

The survey quoted Brilliant Solutions managing director Matt Arena who argues that what sets specialist cases apart is that they require human decision-making rather than automated underwriting.  

Arena says: “The self-employed are the hardest type of borrower to systemise, so it is fair to assume they will continue to form a growing part of the specialist lending sector.”  

The report finds that 81% of brokers believe that the income of clients has become more complex over the last year, adding that 29% of intermediaries said that more than half of their cases over the last 12 months were specialist applications.  

United Trust Bank director of mortgages Buster Tolfree says: “Many applicants no longer fit traditional tick-box criteria and that group is only going to get bigger.   

“The way people earn their income or incomes has and will continue to change. As such, income criteria will be an increasingly important factor for brokers when choosing where to place their cases.   

“Although many applications will require the skills and judgement of an experienced professional to properly assess suitability, that same knowledge and flexibility can be applied when designing and managing auto-underwriting systems and criteria.  

“The idea of being able to ‘take a view’ is more than simply having a human involved. It’s about the approach a lender takes to underwriting and in establishing criteria which recognise that incomes are no longer always singular and straightforward, credit histories aren’t always unblemished and some properties are more unusual than others.   

“Automated or part automated application processes using time-saving technology do not discriminate against specialist cases per se, as long as the system is designed to accommodate applicants with more complex circumstances.”