Freelance borrowers face being effectively ‘locked out’ of the mortgage market by lending restrictions which would force them to raise a £100,000 deposit.
Major lenders have started cracking down on freelancers as part of their own risk-aversion strategies. Santander have blocked mortgage applications from freelancers unless they have a deposit of at least 40%. The average UK house price is around £245,000 meaning under the lenders rules potential homeowners would have to raise a deposit of at least £98,000.
Meanwhile leading bank NatWest have allegedly been declining mortgage applications from any self-employed borrowers who claimed money from any of the coronavirus government support schemes.
Whilst previously one year of accounts and three months bank statements would be permissible as part of the mortgage application process, many banks now require two years accounts and six months worth of bank statements.
The UK housing market has vastly opened up in recent months, with much of the growth down to the Stamp Duty holiday. However many banks are wary of a house price crash once this comes to an end in March and repeated lockdowns have led to financial peril for many small businesses, with banks fearing the owners ability to pay back a major loan or mortgage.
Mortgage broker Jonathan Harris of Forensic Property Finance said: “Some lenders are indiscriminately bashing the self-employed by applying draconian criteria for no other reason than an applicant works for themselves.
“This is frustrating as it doesn’t make sense that the self-employed are considered a greater risk than the employed, given significant numbers of employed workers have been furloughed and face the prospect of unemployment when the scheme comes to an end.”
This isn’t the first time that banks have seemingly made it harder for self-employed borrowers to gain approval for a mortgage. Last year it was revealed that many banks were blocking self-employed customers from taking out a personal mortgage if their company had furloughed workers or made use of any of the other government support schemes.
At the time Santander revealed that it took them 40 days to respond to self-employed applications and that they were dealing with a backlog of freelance customers.