People applying for mortgages can often feel under a lot of pressure, after all, applying for such a loan is a big life decision. However, this process can be made all the more stressful when lenders refuse an application for reasons some may consider unfair. Specifically, 30 per cent of those working zero-hour contracts declined a mortgage due to their profession being considered too unsteady or irregular.
The new findings come from The Mortgage Lender, as it conducted research amongst 2,000 non-traditional workers. This included self-employed workers, freelancers and gig economy workers. It found that nearly one in 10 (nine per cent) of those who have applied for a mortgage have never had an application accepted. In addition, over a third had experienced mixed reactions to their past applications with some approved and some declined.
Close to half (45 per cent) of the respondents have had their mortgage applications rejected. Twenty-eight per cent said it was their volatile income that caused the decision. This was most likely to be the case for Limited Company Directors (35 per cent) and contractors (33 per cent). Traditional professions like lawyers and accountants were also likely to have been rejected for this reason (32 per cent).
Of the self-employed workers within the survey, sole traders were the most likely to have their application approved, with 65 per cent having had all their applications accepted. Those in a partnership structure and company directors also had a high proportion of their applications approved, 56 per cent and 54 per cent.
Workers on zero-hours contracts were the most likely to have had all their applications declined (21 per cent). Sixty-four per cent of gig economy and zero-hours contract worker respondents have had some or all mortgage applications declined in the past. Meanwhile, 63 per cent of contractors have experienced the same.
Rejected mortgage applications
Other reasons for being declined on mortgage applications included:
low credit scores (27 per cent)
missed or late payments (24 per cent)
not having the necessary documentation (24 per cent)
the lender not assessing the monthly payments as affordable (22 per cent)
The professions that were most likely to be rejected were those in technical or craft occupations such as mechanics, plumbers, electricians and gardeners, with 15 per cent having never had an application approved. Those in clerical or intermediate occupations such as secretaries, personal assistants, office clerks were the next likely to be rejected (11 per cent).
In comparison, the more ‘traditional’ professional occupations such as lawyers, accountants and medical professionals were the most likely to have their mortgage application approved, with 49 per cent having all applications approved.
Your job choice shouldn’t impact your ability to apply for a mortgage
Sara Palmer, distribution director at The Mortgage Lender
Sara Palmer, distribution director at The Mortgage Lender comments: “It’s very clear that no matter the profession, those who are not ‘traditionally employed’, have a harder journey to access a mortgage. Because these individuals will often have an irregular or more complex income, many lenders may often view them as higher risk and therefore subject them to more stringent affordability assessments.
“This is despite many of these individuals running successful businesses within the UK, that are highly regarded and provide necessary services.
“Indeed, choosing these jobs and careers shouldn’t come with a penalty later on in life when you’re looking to get onto the housing ladder, or remortgage. It’s vital that self-employed individuals have the same opportunity to access a mortgage as those who are employed. At TML, we believe in lending for real life, and have therefore shaped our criteria to better support self-employed and other non-traditional workers to access the mortgages they need.”
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