Is this the Year Lenders Will Open their Arms to the Self-Employed?
3 minute read
The latest figures from the Office for National Statistics show that the number of self-employed workers in the UK rose once again in the three months to November. There are now a staggering 4.77 million enterprising people who have left the security of employment to start up on their own. The increase in those taking the leap and becoming their own boss is being matched by the growing number of companies that are recognising the value of freelance talent. In this time of uncertainty, this army of skilled professionals is enabling businesses to manage periods of high demand without having to increase their long-term labour costs. This is helping the UK retain its place as one of the world’s most flexible, knowledge-based economies.
Freelance Finance Considerations
While escaping the confines of the 9-5 will seem like an attractive prospect to many, freelancers should also be aware of the financial security they lose. There is no company sick pay or holiday pay for freelance workers, they must make their own pension arrangements, and they are also responsible for filing a self-assessment tax return to pay income tax and National Insurance contributions. There is also an impact on a range of other financial products, particularly the mortgage. Mortgages for the self-employed have come a long way in the past few years, but even now some mainstream lenders struggle to meet the needs of this growing market. As a result, self-employed mortgages have been less readily available and can be more expensive than conventional products. But could 2017 be the year when all that starts to change?
The Changing Tide
If you are self-employed, traditionally it has been much more difficult to find an affordable mortgage. In many cases, the self-employed may not have a long history of earnings and have an income that can vary from year to year. This can make it difficult for lenders to measure a mortgage’s affordability. As a result, many lenders ask for a two or three-year track record of self-employed earnings, which is simply not feasible for many new self-employed workers. In recent years, there has been an increase in the number of specialist lenders filling the self-employed mortgage void, and this is continuing into 2017. These specialist lenders, many of which are only available through brokers, are more attuned to the needs of self-employed workers. They often consider borrowers with as little as 12 months trading history, and in the case of contractors, will also factor future earnings based on the value of a current contract into their affordability calculations.
As with any mortgage, the greater the deposit or equity you have in a current property, the lower your mortgage rates are likely to be. However, as a guide, self-employed mortgages are still available at up to 95 percent loan-to-value, with many rates still to choose from that hopefully will suit your particular requirements. The number of deals out there are also likely to increase as the year goes on. We have helped many self-employed customers find a mortgage that suits both their budget and their lifestyle. If you’re ready to secure your self-employed mortgage, contact our experts today.