Self-employed mortgage market set to grow by 67% in next five years

"As more and more people find themselves to be a sole trader, freelancer, side-hustler or majority shareholder a more inclusive approach is required from the financial services industry"
- John Barker, CEO of personal finance at Together

Lending to self-employed mortgage applicants is set to rise by 67% over the next five years - from £20.9bn in 2023 to £34.8bn by 2029, according to findings from specialist lender Together.

With the last twenty years seeing the number of self-employed already swelling from 3.2m to 4.3m, including a further 183,000 in the first quarter of 2024, Together’s research highlights the growing need for support that self-employed aspiring home owners need in accessing finance. 

From ad-hoc gig workers to company directors, self-employed people are more likely to be rejected for mortgages, investments or loans from high street lenders for multiple reasons. They may have fluctuating income levels, multiple sources of income or unable to provide evidence of income all of which places them outside the normal criteria for a loan.

According to new research from Together, a fifth (22%) of rejected mortgage applicants who would be classed as ‘non-standard’ were rejected because they were self-employed and 10% said this was due to having sporadic income. Challenges faced by the growing numbers of self-employed have meant that just 5% of self-employed mortgage applicants have been successful within the last 12 months. 

However, the changing nature of society as well as work and lifestyle patterns means that the sector is likely to continue to expand still further in the coming years.

This matches a broader trend, where the number of homeowners and potential homeowners with 'non-standard' situations is on the rise nationally - highlighting the demand for a more flexible approach from the industry to helping non standard applicants achieve their property ambitions. 

A third (29%) said that greater flexibility on mortgage repayments including the ability to overpay or underpay would improve their mortgage application experience. 14% added that it would be most helpful if lenders standardised the definition of and criteria for non-standard applicants.

John Barker, CEO of personal finance at Together, commented: “During economic downturns the tendency of mainstream lenders to reassess their strategies will lead to an environment that is more cautious or risk averse. In turn this will always be more favourable to employed borrowers with perfect credit histories over say lending to the self-employed or those with past credit blemishes - even where the latter can put down a larger deposit. 

“Bespoke, non-automated underwriting utilised by specialist lenders takes account of such issues and allows a funding decision to be made on a more holistic view of the borrower’s financial circumstances. And as more and more people find themselves to be a sole trader, freelancer, side-hustler or majority shareholder a more inclusive approach is required from the financial services industry where common-sense is applied to lending with applications judged on merit – looking at the whole picture, not just your credit score or loan-to-income ratio.”