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Tuesday, April 23, 2019

Opinion > Masthaven

Why hasn’t the high street woken up to the rise in self-employment?

Matt Andrews, managing director of mortgages at Masthaven Bank | 16:57 Wednesday 1st August 2018

It’s high time the high street took notice of the UK’s burgeoning self-employed landscape.

Take a look around any major city and you’ll see that the working world is changing. Whether it’s graphic designers hunkered over laptops in trendy coffee shops (I like to get the clichés out of the way early on) or technology-enabling communication among people all over the world, the employment landscape is changing rapidly.

And one of the areas that is unlikely to have escaped your notice is the rise of self-employed people. In the UK, the traditional nine-to-five office job is becoming a thing of the past as more and more people decide to set up their own businesses.

The scale of this shift away from traditional employment is considerable: in 2001 there were 3.3 million self-employed people; by 2017 there were 4.8 million, representing over 15% of the UK workforce. And yet, I’d wager that many of these people are being ignored by high street lenders.

Digging a bit deeper into the data, self-employment levels are growing among key demographic age groups for banks:

16- to 24-year-olds: from 104,000 in 2001 to 181,000 in 2016
65 and over: from 159,000 in 2001 to 469,000 in 2016

These are people at key life stages. 

That first group of younger people could be getting ready to think about moving on to the property ladder; the second could be looking ahead to retirement, getting ready to downsize, go into buy-to-let or buy a second home. 

A ready market, then. But the problem is – and as our research attests – many self-employed people don’t hold out much hope when it comes to getting a mortgage. 

Last year, Masthaven polled more than 2,000 UK adults – and the results, which we called Game of Loans, make for interesting reading: 55% of self-employed people think it will be difficult to get a mortgage today and a significant 70% believe getting a mortgage is more about which financial boxes you tick rather than your actual situation.  

With many high street lenders asking for three years’ worth of accounts and with affordability models failing to reflect the concept of self-employed income, it's not hard to see why. 

It’s high time mainstream lenders got with the programme. At Masthaven, we’ve long considered self-employed people very much part of our customer base – in fact, 32% of our first charge mortgages are now with self-employed customers.

The conventional box-ticking approval process preferred by many big banks isn’t something that’s adopted at Masthaven – we use trained mortgage underwriters with the skills to read and assess applications, we don’t credit-score and we operate a nuanced criteria policy.

Fundamentally, it’s about looking for the person behind the application, not marking them against a set of criteria. For some reason, self-employed lending is often referred to as ‘specialist’ lending. But really, there’s nothing particularly specialist about it. The world is changing. Time the big banks did, too. 

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