Traditional lenders' rigid criteria leave millions locked out of homeownership
The UK’s self-employed workforce has amassed nearly £82 billion in disposable income, yet many continue to face barriers in securing mortgages.
According to new research from specialist lender Together, four in five self-employed individuals have struggled to obtain a home loan, with strict lending criteria limiting their options.
Despite holding a combined £81.5 billion in wealth — equivalent to 1.6 million average first-time buyer deposits — many self-employed borrowers find themselves locked out of the mainstream mortgage market. The study found that 87% of self-employed workers believe it is “much harder” to obtain a mortgage due to their employment status, with 83% stating that current lending policies put them at a disadvantage.
The challenges stem largely from traditional lenders’ reliance on automated assessments that favour applicants with predictable, salaried incomes. In response, 87% of self-employed individuals said they would be willing to take on additional work to demonstrate financial stability on paper.
The self-employed sector has expanded to 4.4 million people, with income levels rising 7% since the pandemic and 26% over the past decade, according to Together’s research. Meanwhile, separate forecasts indicate lending to self-employed mortgage applicants will increase by 67% over the next five years, climbing from £20.9 billion in 2023 to £34.8 billion by 2029.
The study found that self-employed workers have an average of £51,000 saved for home deposits, with nearly one in five (19%) planning to buy property within the next year. A further 45% intend to purchase at some point, with 68% of those planning to seek a mortgage.
However, high rejection rates remain a major deterrent. The survey revealed that 83% of self-employed individuals feel the mortgage system is stacked against them, while 82% have reconsidered self-employment due to these financial challenges.
The findings come as the UK economy faces slower-than-expected growth and rising costs following Chancellor Rachel Reeves’ tax-focused Budget. In response, mainstream lenders appear to be tightening mortgage criteria further, leaving self-employed borrowers with limited options.
Together has called for a shift in how banks evaluate mortgage applications, arguing that rigid lending policies are preventing millions from entering the housing market. The lender suggests that more flexible underwriting could not only help self-employed buyers but also boost the property market by freeing up rental homes and supporting developers.
Ryan Etchells (pictured), chief commercial officer at Together, emphasised the need for lenders to better support self-employed borrowers.
“The country’s self-employed workers are crying out for lenders to support their home-owning ambitions,” he said. “In a lot of cases, despite holding an average deposit of £51,000 saved for a new home, self-employed customers still contend with major issues, financial prejudices, and a lack of understanding of their incomes and finance needs from mainstream banks.
“In economically tough times, lending appetites for mortgage applications considered complex dwindle to almost nothing, which we would say is unfair when it comes to the nation’s self-employed wealth creators.
“Specialist lenders can offer bespoke underwriting to get to know the borrower’s individual circumstances. It would be fantastic to see other lenders following suit, providing the same level of support for this large but underserved section of the UK’s workforce.”
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