The UK workforce has changed significantly over the last few years. Not only has self-employment been on the rise and contributed strongly to employment growth, with self-employed now standing at 4.2 million, but the number of people who were unemployed or furloughed increased as recent lockdowns forced many businesses to close.
This demographic shift, however, is resulting in a growing number of customers who are unable to fulfil their homeownership dreams because self-employment means traditional high-street lenders would say no.
This is often because these lenders use computer-based underwriting processes which won’t necessarily have the skills to manually interpret accounts to fully understand these customers. Specialist lenders, on the other hand, individually assess each loan, allowing them to fully understand their customer’s unique borrowing needs.
The specialist lending market continues to support those borrowers who are disenfranchised by the mainstream lending community by offering alternative options. At Bluestone, for example, we recently updated our lending criteria to support self-employed borrowers impacted by COVID-19, considering how the applicant’s business was affected by the pandemic and the sustainability of their income.
For self-employed borrowers in this position, we will use the applicant’s 2019/2020 income where they can demonstrate earnings in the most recent three months have returned to that level.
But while the events of the last year and a half have certainly increased awareness and understanding of the specialist lending market, there’s still progress to be made in terms of delivering better customer outcomes.
As a growing number of lenders look to bring new solutions to market to support self-employed customers, the most important thing brokers can do is to get familiar with the range of solutions available.
There’s also still a perception among brokers in the market that specialist lenders can be tricky to deal with due to the toing and froing in the application process. To deal with this, brokers should work proactively with broker teams and BDMs to provide all the required information, which will make for a much more seamless experience for all.
From a lender perspective, ongoing support will be vital. With the market constantly evolving, lenders must ensure to provide regular updates to brokers so that they can stay on top of product changes. It will be the lenders who make this information readily available that will benefit the most.
As the DNA of our workforce continues to change, signposting will be vital and this is an area where mainstream lenders must get better. A significant proportion of self-employed borrowers will be unaware that the specialist mortgage market even exists, and if they’ve been turned away from a high-street lender, they may think they have nowhere else to go.
As an industry, we have a moral responsibility to support would-be homeowners onto the property ladder, and self-employed workers are no different. And, particularly as this part of the labour market is expected to grow, there is a clear opportunity for brokers and lenders alike.
