In our latest interview for Mortgage Introducer magazine, Peter Beaumont, deputy CEO of The Mortgage Lender discusses the need for the market to respond to the rise in self-employment…
Whether you’ve noticed it or not there has been a revolution in self-employment in the UK over the last decade.
Since 2008 an additional half a million people have chosen to go it alone and the self-employed now account for one in seven of the workforce. It’s a trend that’s not showing any signs of slowing down either. In fact, by 2022 it is set to rise to 5.5m.
And while some people question whether the recent growth represents a new wave of entrepreneurship and a desire for flexible working – or a tool for businesses to hold down pay and restrict workers’ rights – a closer look at the data shows self-employment stretches well beyond the budding entrepreneurs and gig economy workers the sector can often be characterised by.
According to the Resolution Foundation, nearly 60 per cent of the growth in self-employment since the 2008-2009 recession has been in high-skilled, higher-paying sectors.
The trend has been labelled as one of the defining characteristics of the economic revival after the crash and accounted for half of all job growth between 2008 and 2014.
And while the majority of people who are self-employed report being more satisfied with their work – 84.4 per cent against 76.2 per cent, and their personal life, 76 per cent against 75.4 per cent according to a 2015 report by the RSA – they are not satisfied with the impact their employment status has, or is perceived to have, on their ability to secure a mortgage.
And that’s a problem for the housing market and lenders.
Our own research into the self-employed experience of the housing market reveals high levels of discontent among potential borrowers.
The insight, gathered from 500 people who are sole traders, contractors or running a business with up to nine employees, suggests widespread dissatisfaction with the way self-employed people feel they are treated when they apply for a mortgage.
A large majority (71 per cent) believe self-employed people are discriminated against when it comes to securing a mortgage. And over a quarter (27 per cent) have been put off buying a property because they didn’t think they would qualify for a mortgage because of their employment status.
Twenty-six per cent of those asked admitted they would live in a different house if their income was treated the same as an employed person for mortgage purposes, which is undoubtedly contributing to a reduction in transaction numbers, alongside changes in Stamp Duty levels, at the higher end of the market.
One respondent felt particularly aggrieved they couldn’t get a mortgage when they had a history of paying rent that was nearly twice as much as their mortgage payments would be:
“I feel strongly that lenders should focus on affordability more, it is crazy I pay £1,500 a month rent but can’t get a mortgage for £800 a month. Anybody can lose their employed job at any time, they have to look for another. Same for the self-employed. If business stalls then they have to look for further work,” he said.
While another pointed out that giving a joint mortgage to employed couples was as inherently risky as granting one to a self-employed person, if not more so.
“A huge number of couples get divorced, yet lenders are prepared to grant couples mortgages. How are self-employed people a greater risk,” he asked.
A fifth of self-employed people even admitted they had reconsidered their employment status because of the uncertainty of securing a mortgage, while two-thirds believe mortgage lenders have a responsibility to provide a better level of support to the self-employed, contract workers and business owners.
And it’s a responsibility the industry needs to take seriously.
Self-employment is going to continue to grow, the people who are self-employed are going to create jobs in our economy and pay taxes into the public purse.
They deserve to feel as if they are valued customers of the mortgage industry and have the same choices as their employed counterparts when it comes to where they live and their ability to secure a mortgage.
Or, as one of our panel told, us: “I would hope for a more flexible/enlightened approach to the self-employed. We are as hard working, probably harder, as the employed and we take debt repayments very seriously.”
In my experience I would have to agree.