More banks and building societies should consider lending to self-employed landlords, according to the Mortgage Broker Ltd.
The national mortgage broker is urging the mortgage industry to catch up with modern living and end the view that self-employed landlords are less secure than those with PAYE incomes.
Mortgage Broker Ltd points to recent data from the Office of National Statistics (ONS), which shows that the level of self-employment in the UK rose from 3.8 million in 2008 to 4.6 million in 2015.
The age of both the part-time and full-time self-employed landlords has also risen, while the percentage of self employed individuals in finance and business services has shot up, concentrated in the South East and London.
In fact, the total number of self-employed workers is fast catching up with the volume in the public sector, which now represents 16% of the workforce.
Research from The Tenancy Deposit Scheme (TDS) shows that close to 20% of landlords have their own business and nearly a third are salaried.
According to The Mortgage Broker Ltd, despite the fact that self employment is growing and making a significant contribution to the UK economy, many self-employed landlords are struggling to get a mortgage.
Darren Pescod, managing director of The Mortgage Broker Ltd, said: “Figures from Nottingham Building Society show that nearly one in eight self-employed people have been rejected for mortgages since working for themselves, despite often earning more than in their previous full-time employed job.
“Furthermore, the research reveals 12% of self-employed workers have been turned down for a first-time mortgage or remortgage, underling the problems of proving income and affordability for customers who are not full-time employees.”
Ten years ago, sole traders had no problem securing a BTL mortgage, but thanks to tightened lending criteria, many banks and building societies are turning down self-employed investors, according to Pescod.
He added: “The reality is that a borrower with appropriate mortgage protection in place is low risk, regardless of whether they have their tax paid for them, or, if they do it themselves.
“Historically, the self-employed landlords have been a fairly marginal group and many lenders could safely ignore them. However, the rise of the ‘gig economy’ - people having temporary jobs, or doing separate pieces of work, each paid separately, rather than working for employers – is growing fast and will lead to changes in mortgage lending and the economy overall.
“Thankfully, we now have access to mortgage lenders that are looking at the self-employed a bit more leniently, with some lenders considering criteria of only needing one year’s accounts where previously three years accounts was the minimum required.”