Close to half of non-PAYE workers have faced mortgage rejection

Close to half (45%) of non-PAYE workers who have applied for a mortgage have had their application rejected according to new research from The Mortgage Lender (TML).

TML’s research amongst 2000 non-traditional workers, including self-employed workers, freelancers and gig economy workers, found that nearly one in ten (9%) of those who have applied for a mortgage have never had an application accepted. In addition, over a third had experienced mixed reactions to their past applications with some approved and some declined.

Of the self-employed workers within the survey, sole traders were the most likely to have their application approved, with 65% having had all their applications accepted. Those in a partnership structure and company directors also had a high proportion of their applications approved, 56% and 54%.

Workers on zero hours contracts were the most likely to have had all their applications declined (21%). 64% of gig economy and zero hours contract worker respondents have had some or all mortgage applications declined in the past, while 63% of contractors have experienced the same.

According to those who have experienced mortgage rejection in the past, 30% said that it was because their profession had been considered too unsteady or irregular, and 28% stated it was due to the volatile nature of their income. This was most likely to be the case for Limited Company Directors (35%) and contractors (33%). Traditional professions like lawyers and accountants were also likely to have been rejected for this reason (32%).

Other reasons for being declined on mortgage applications included low credit scores (27%), missed or late payments (24%), not having the necessary documentation (24%) and the lender not assessing the monthly payments as affordable (22%).

The professions that were most likely to be rejected were those in technical or craft occupations such as mechanics, plumbers, electricians and gardeners, with 15% having never had an application approved. Those in clerical or intermediate occupations such as secretaries, personal assistants, office clerks were the next likely to be rejected (11%).

In comparison, the more ‘traditional’ professional occupations such as lawyers, accountants and medical professionals were the most likely to have their mortgage application approved, with 49% having all applications approved.

Sara Palmer, Distribution Director at The Mortgage Lender comments: “It’s very clear that no matter the profession, those who are not ‘traditionally employed’, have a harder journey to access a mortgage. Because these individuals will often have an irregular or more complex income, many lenders may often view them as higher risk and therefore subject them to more stringent affordability assessments. This is despite many of these individuals running successful businesses within the UK, that are highly regarded and provide necessary services.

“Indeed, choosing these jobs and careers shouldn’t come with a penalty later on in life when you’re looking to get onto the housing ladder, or remortgage. It’s vital that self-employed individuals have the same opportunity to access a mortgage as those who are employed. At TML, we believe in lending for real life, and have therefore shaped our criteria to better support self-employed and other non-traditional workers to access the mortgages they need.”

Methodology

Research undertaken on behalf of The Mortgage Lender (TML) by Censuswide amongst 2000 ‘non-PAYE’ workers, including 1264 self-employed workers, 324 freelancers, 152 zero hour contract workers, and 102 gig economy workers. Fieldwork completed between 28th June 2024 and the 8th July 2024.