Self-employed twice as likely to be rejected for a mortgage

25 May, 2022

Self-employed individuals are twice as likely to be rejected for a mortgage, according to a new Exploring Adverse Credit report from The Mortgage Lender (TML).

Nearly a quarter (23%) of self-employed individuals have had their mortgage application denied in the past compared to just 12% of employed workers.

Self-employed applicants are often treated with stricter affordability assessments to those who are employed, mainly because they are considered to have a more irregular or complex incomes and are therefore viewed as riskier to lenders. This can make it trickier to get through the mortgage process, with the survey finding that of those who have ever tried to get a mortgage, 19% of self-employed applicants have had mixed results of whether their application was accepted or denied, compared to only 11% of employed individuals who said the same.

This is a problem that requires a solution. There are around 4.2 million self-employed people in the UK, and although that number is smaller today than it was at the start of the pandemic, in the pre-Covid world the number of people choosing to work for themselves had been steadily rising since the early 2000s. While some self-employed people can also be high earning, income is still deemed complex, which can make it challenging for this group to access finance to either buy or re-mortgage a property.

But even taking steps to make themselves a more appealing mortgage applicant, such as a strong credit score, self-employed individuals are more easily deterred from getting a mortgage or do not see the benefits of accessing loans due to their employment status. In fact, less than two in five (38%) agreed that the strength of their credit score allowed them to access better loans and interest rates, compared to nearly half (48%) of employed people who said the same.

With a growing number of people becoming self-employed, lenders must adapt and be open to offering mortgages to those with more complex incomes.


Peter Beaumont, CEO at The Mortgage Lender said: “There are around 4.2million self-employed people in the UK, and it is typical for that number to grow when coming out of a recession, or in this case a pandemic also. While it may offer those workers more freedom, the major drawback of self-employment is the perception of income inconsistency, and consequently a greater challenge when it comes to borrowing large sums of money.

“Fortunately, there are steps the self-employed can take to make themselves more attractive to lenders, like increasing their credit score, or saving for a bigger deposit to bring down their loan-to-value ratio.

“At the same time, however, the onus must fall on lenders to be more open to working with these enterprising individuals. We are proud to offer a competitively priced product range that caters to those with complex incomes.”