Newly self-employed borrowers rush to take advantage of relaxed criteria
Brokers are working with a significant number of self-employed borrowers with just one year’s worth of accounts, new research from criteria search specialist Knowledge Bank has revealed.
This rush of self-employed applicants may be as a result of lenders softening criteria for freelancers recently, with a number of lenders, including NatWest and Halifax, now accepting borrowers who have used the Self-Employed Income Support Scheme (SEISS).
These results come from Knowledge Bank’s industry leading criteria tracker for September. The tracker reveals the searches that brokers actually conduct, and the prominence of searches for ‘self-employed – one year’s accounts’ is a strong indication of the types of clients brokers are working with.
Despite the number of self-employed people in the UK falling by roughly 700,000 in the year following the first lockdown, according to Statista, there has been a slight increase in the past few months.
Also in the residential market, brokers were working with a number of clients who have chequered financial histories. ‘Defaults’ featured twice in the five most-searched terms in September including ‘Defaults registered in the past three years’ and ‘Defaults registered over three years ago’.
Financial difficulties have been a trend for the past six months, with at least one term such as ‘missed payments’ or ‘defaults’ featuring in the most-searched terms in the residential arena since March.
In September borrowers were also looking to use second charge mortgages to help ease financial pressure. ‘Capital raising for debt consolidation’ was amongst the most-searched terms by brokers looking for second charge products.
In the bridging market, ‘second charge loans’ appeared in the most-searched terms for the first-time since February 2021. Those wanting second charge bridging loans are looking for finance for a range of activities, some of which include: business expansion, property investment, and renovating existing properties, potential looking to make them more energy efficient.
Matthew Corker, operations director at Knowledge Bank commented on the difficulty that brokers working with self-employed clients have encountered recently.
He said: “Lenders are understandably being cautious with borrowers with just one year of accounts. Most industries have been impacted to some degree by the various lockdowns, so untangling whether income is sustainable and a reliable indicator of future performance has been difficult.
“Lenders are relaxing restrictions slowly, however, there is still some way to go for self-employed applicants before they are afforded the same variety of choices they had prior to the pandemic.
“Outside of the self-employed market, with the stamp duty holiday ending at the end of September, a clearer picture of the mortgage market is coming into focus.
“One area that sadly looks set to stay is financial difficulties. The pandemic certainly impacted people’s finances, and searches connected to defaults and debt consolidation look set to continue.
“Another constant from the pandemic that is certain to continue is the vast number of criteria changes – there have been a remarkable 37,214 changes so far this year. With the continual stream of criteria changes, brokers do not have time to spend hours every day on the phone to lenders and updating spreadsheets with the latest criteria.
“Using a comprehensive criteria search system can save brokers a massive amount of time, and also ensure they are providing best advice.”
Brokers wanting to find out more about Knowledge Bank can visit the web address: www.knowledgebank.uk
Criteria Activity Tracker
Top five searches performed by brokers on Knowledge Bank during September 2021
| RESIDENTIAL | BUY-TO-LET | SECOND CHARGES | EQUITY RELEASE | |
| 1 | 1. Maximum Age at End of Term | 1. First Time Landlord | 1. Maximum LTV / Loan To Value | 1. Flat Roofs |
| 2 | 2. Self Employed – 1 Year’s Accounts | 2. Lending to Limited Companies | 2. Mortgage or Secured Loan Arrears or Defaults | 2. Early Repayment Charges |
| 3 | 3. Income Multiple used for Affordability Assessment | 3. Minimum Income – Interest Only / Part and Part Single Applicant | 3. Capital Raising for Debt Consolidation | 3. Non-standard Construction |
| 4 | 4. Defaults – Registered over 3 years ago | 4. Requirement to be a Homeowner | 4. Married Couple Application in One/Single Name | 4. Married Couple Application in One/Single Name |
| 5 | 5. Defaults – Registered in the last 3 years | 5. First Time Buyers | 5. Maximum Age at End of Term | 5. Sheltered Accommodation |
| SELF-BUILD | BRIDGING | COMMERCIAL | |
| 1 | 1. Maximum LTV / Loan to value | 1. Regulated bridging | 1. Semi-commercial properties |
| 2 | 2. Lend against land | 2. Minimum loan amount | 2. Mixed use properties / part commercial |
| 3 | 3. Barn conversion | 3. Maximum LTV / Loan To Value | 3. Minimum loan amount |
| 4 | 4. Maximum LTC / Loan to cost | 4. Commercial property | 4. Maximum LTV / loan to value |
| 5 | 5. Farm or small holding | 5. Second charge loan | 5. Commercial owner occupier |
