Quarter of those with complex incomes refused mortgages

By: ameer@trustedteam.com

Over a quarter (28%) of adults with non-typical income streams, including those who are self-employed, have had a mortgage application rejected by a lender, according to research from The Mortgage Lender (TML).

The survey of 2,000 adults conducted by polling agency Opinium in March 2023, found that those on zero-hours contracts have the biggest rejection rates, with 46% having had a mortgage application denied.

Freelancers come second, with 29% having been rejected by a lender, followed by 10% of self-employed people.

It can be more difficult for those with a complex income to get a mortgage because they are perceived to be a higher risk to lend to than those who are paid under a traditional employment contract.

While more than a quarter of this group have been denied a mortgage in the past, encouragingly 26% of those reapplied.

Looking at reasons why those with complex incomes were rejected for a mortgage, 13% said it was because of no proof of deposit. A further 12% said a lack of mortgage guarantor was the reason, while the same number said they were denied a mortgage as a result of them making too many credit applications.

Other reasons include not having bank statements for the last three to six months (10%); not having the last three months’ payslips and P60 form (10%); not having their tax return form SA302 (9%); not having a statement of two- or three-years’ accounts from an accountant (9%); a poor credit score (10%), and unused credit cards (10%).

TML chief commercial officer Steve Griffith concedes that getting a mortgage has traditionally been trickier for those who have a more complex income, such as being self-employed, owing to the fact they are viewed to have a less predictable income stream.

But, he insists: “This doesn’t make them unmortgageable. The reality is, as we recuperate from the impacts of the pandemic, and now with the rising cost of living, high inflation and interest rates, affordability continues to be a top concern for those trying to reach their homeownership goals”.

He adds: “Encouragingly, our research has found those with complex incomes have not been deterred from getting a mortgage, with many reapplying at a later stage.

“This does however highlight the importance of seeking advice from a mortgage broker and considering specialist lenders who can be instrumental in supporting those who thought it might not be possible to get a mortgage and give them the same access to opportunities to get on the property ladder as those on PAYE.”

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