Self-employed affordability criteria being tighten by lenders

“The self-employed continue to face a complicated affordability landscape as more lenders toughen criteria for mortgage applicants in this group and the amount of options reduces.”

According to the latest data from Mortgage Broker Tools, The amount of cases where at least one lender is available to meet the loan requirements of self-employment mortgage applicants has fallen in February.

Figures divulged that 67% of self-employed cases processed through MBT Affordability had at least one affordability option, down from 71% in January. In February, 31% of cases were presumed to be unaffordable based on the clients’ required loan amount and lenders were unable to lend on just 2% of cases.

In contrast, across the whole of the market, 79% of cases were affordable in February, which is slightly down from the peak of 80% in January. There was at least one lender able to meet the loan requirements of 86% of first-time buyers, 84% of remortgage customers and 81% of home movers.

The average maximum loan available to self-employed mortgage applicants have dropped by just over 2% to £216,000 in February. Yet the biggest change was the average minimum loan available, which fell by more than 18% to £96,935 – mirroring a significant tightening of self-employed affordability criteria amongst some lenders.

Tanya Toumadj, CEO at Mortgage Broker Tools, said: “The self-employed continue to face a complex affordability landscape as more lenders tighten criteria for mortgage applicants in this group and the number of options reduces. We have also seen the spread between the average minimum available loan size and the average maximum available loan size widen to more than £119,000. For brokers who only try one or two lenders, this can give a false impression that their clients have no chance of achieving the loan size they require.

“However, it’s important to remember that there was at least one affordable option for more than two thirds of self-employed cases processed through the MBT Affordability platform in February. The message here is that the choice of lender makes a big difference to the amount a self-employed mortgage applicant can borrow, so brokers need to make sure they are considering all of the affordability options to ensure they are providing their clients with the most suitable recommendations.”