How brokers can best support non-traditional workers on their journey to homeownership

For non-traditional workers like freelancers, self-employed individuals, zero-hour contract workers, gig economy workers, and contractors, the path to homeownership can come with significant hurdles. Affordability issues, stringent mortgage criteria and a lack of education on the mortgage process make it difficult for non-traditional workers to achieve their homeownership ambitions. Despite these challenges, our latest research suggests that a strong contingent of non-PAYE workers remain confident that their plans to buy property will become a reality.

To help them on this journey it’s important that brokers are aware of the challenges facing this group, and are ready to work with specialist lenders to find appropriate solutions. 

Non-traditional workers are optimistic about homeownership in the near future

Four-fifths (79%) of non-PAYE workers have plans to buy a property in the near future according to our latest research. Within this, a fifth (22%) plan to buy their first home, whilst 14% plan to become a landlord, 13% have plans to rent, 11% plan to buy their second home, and 9% plan to either sell their property or downsize. 

Encouragingly, of those with property plans, a majority (73%) of non-traditional workers are optimistic about achieving these plans in the next five years. This confidence is especially evident amongst the younger generation, with 18-24 year olds polling as the most optimistic (84%), compared to 25-34 year olds (78%), and 35-44 year olds (70%).

1 in 3 (35%) said they are optimistic about their plans due to an expectation that their earnings will soon increase and the same proportion felt they were already on the way to achieving their plans. Similarly, 33% believe they will have saved enough for their deposit within the next five years. 

Recent economic improvements have been an encouraging factor, with a quarter (24%) being optimistic about interest rates coming down, 17% think inflation will continue to come down or stay low, 16% believe the housing market to be more stable, and 12% feel encouraged by the Government’s plans to build 1.5m homes in the next five years.

Hurdles to homeownership for non-traditional workers

However, there are still obstacles to overcome, even for those confident they can achieve their plans.  

45% of non-PAYE workers who had previously applied for a mortgage say they’ve been denied at least once, with close to one in ten (9%) having been denied every time they have applied. Younger buyers were more likely to have been denied with 1 in 5 (22%) aged 18-34 saying they have had all their mortgage applications declined. 

And not all non-traditional workers have been treated the same; 64% of gig economy and zero-hours contract worker respondents, respectively, have had some or all mortgage applications declined in the past. 63% of contractors have experienced the same. In comparison, self-employed sole traders have had the most luck with applications as 65% have had all their applications approved, followed by self-employed partners at 56% and self-employed company directors at 54%.  

When asked why they had been rejected, the majority (30%) said it was due to a view that their profession was irregular or unsteady. A further 28% were rejected because their income was too volatile. 

This is prompting some non-PAYE workers to not apply at all. A quarter said they have not applied for a mortgage because they didn’t think they’d be approved, with 50% saying they felt their employment status had negatively impacted their home-ownership ambitions. 

Looking to the future, a similar group have expressed their concerns about buying their first, or next property. A quarter (24%) are not optimistic about achieving their property plans in the next five years. 

Affordability appears to be a major reason behind this, as over half (53%) say the cost of living means they’ve needed to use their savings and income elsewhere. Similarly, over a third (36%) say the property in the area they want to buy or rent is too expensive, and 33% have not yet built up their deposit.

Whilst the economic situation has improved considerably over the last year, a fifth (20%) think tax increases will make it harder to achieve their goals, 15% don’t think interest rates will be low enough for them to afford a mortgage, and 10% think stamp duty is too high.

This has had an impact on confidence as a result, with 26% assuming they would not be approved for a mortgage. In a similar vein, just a fifth (22%) of non-PAYE workers feel motivated to try to achieve their property goals.

The role of brokers in helping non-traditional workers secure a mortgage

Despite mortgage brokers being an integral part of the mortgage process, out of the 64% of non-PAYE workers who have applied for a mortgage, under half (49%) say they used a mortgage broker.

However, when non-traditional workers used a broker, the responses were overwhelmingly positive. 96% of non-PAYE applicants who had, said mortgage brokers understood their needs when it came to buying a property.

Industry knowledge was cited multiple times, with mortgage applicants praising brokers for knowing the specialist market (93%) and helpfully explaining terminology and details (92%).

94% felt that brokers knew what lenders to approach for their application, 96% said brokers were helpful in knowing what paperwork applicants needed, and 89% said brokers understood their income streams. 

A similar number (95%) said brokers were helpful in sorting the mortgage application on their behalf, whilst 93% agreed that brokers helped to secure the best products and the best deal/rate available.

On top of this, advice was also a key consideration that stood out to mortgage applicants. 92% shared that brokers were helpful in knowing how much deposit applicants needed, whilst 80% were keen to spotlight brokers’ ability to advise applicants on how to build their credit score. Similarly, 89% shared that brokers were helpful in knowing what other products applicants needed i.e. insurance/income protection.

Evidently, when customers are using brokers they are seeing the benefits, but more needs to be done to support and point those that aren’t using a broker towards doing so. 

The role of lenders in supporting non-PAYE workers achieve homeownership

The research presents a clear opportunity for both lenders and brokers alike to support non-PAYE workers with their goals of homeownership, especially considering the positive developments made in the market this year. As such, now is a good time for lenders and brokers to review their offerings for non-traditional workers, and consider whether they need to make adjustments or reflect on the kind of education and information they provide to this group.

With specialist lenders often best equipped to support non-traditional workers, building relationships with these lenders can be crucial for brokers. Each will likely have different criteria, so getting close to these details will ensure you have them in mind when facing a tricky to place case. TML, for example, prides itself on its real-life lending approach, which means addressing cases individually in order to offer the best solution. We do this by having more agile criteria in comparison to high-street lenders, such as asking for just one year's worth of accounts instead of two, or using the latest three months’ business bank statements instead of six, meaning there’s greater flexibility for brokers who are supporting non-PAYE clients. By working together lenders and brokers can ensure they are supporting those with complex incomes and helping them reach their homeownership goals.