No hope for two thirds of self-employed first time buyers

Nearly two thirds of self-employed people do not know how they will manage to buy their first home, with many giving up being self-employed to save for a mortgage.

Getting on the property ladder in the UK is no mean feat, even more so for those who are self-employed. The latest quarterly FirstTime Buyer Index, published by Aldermore, finds that two thirds (67 per cent) of aspiring first time buyers feel that getting on the property ladder is difficult.

Self-employed woes

New insight shows that almost seven in ten (68 per cent) of self-employed first time buyers think that getting on the property ladder is difficult and three in five (62 per cent) do not know how they will ever manage it. For almost one in three (32 per cent) raising the deposit is the biggest obstacle, whilst for one in seven (14 per cent), the biggest hurdle is just being able to secure a mortgage.

Things can get so hard that almost a third (32 per cent) who have recently bought actually had to give up being self-employed in order to get a mortgage, whilst over one in ten (12 per cent) currently trying to save for a deposit have had to take on a second job to earn extra money.

Sacrifice and forfeit

Getting on the property ladder requires sacrifice and dedication. Almost one in five (18 per cent) first time buyers say they are under pressure from their family to buy, while a further 18 per cent
say they are feeling the pressure from their partner.

In order to save for the deposit, first time buyers are also making a series of sacrifices. Nearly one in three (30 per cent) have cut back on eating out, almost a quarter (23 per cent) have cut out holidays while over one in five (21 per cent) have been working longer hours.

Calling for change

When asked what could be done to improve the lot for first time buyers, the key request is to address rising house prices (46 per cent). For two in five (39 per cent), an extension of the government’s Help to Buy schemes would be gratefully received whilst 30 per cent just want to see the whole house buying process simplified.

For 37 per cent of those who are self-employed, introducing better mortgage products is key, as well as adapting the criteria for self-employed borrowers (33 per cent).

Getting on the housing ladder

For more than a third (35 per cent) of respondents, the main hurdle to getting the keys to their own home is raising a deposit, (slightly down from 39 per cent in Q4 20162), and a quarter (26 per cent) of first time buyers will rely on their parents for help – this remains on a level with Q4 2016 (27 per cent). Concern around mortgage affordability (10 per cent) has increased from Q4 last year (6 per cent).

Of those who have recently bought, the main problem experienced by almost one in five (18 per cent) was saving enough for a deposit, whilst one in ten (10 per cent) found the whole process very difficult.

The number of those who will be joining forces with their partner in order to fund their deposit has risen to 45 per cent from 38 per cent in the last quarter, meaning the number of people buying with their partner has also increased considerably from Q4 2016, from 45 per cent to 64 per cent.

Charles McDowell, Aldermore’s commercial director, mortgages, says, ‘First time buyers are the driving force of the property market but our Index reveals just how hard it is for them to get on the ladder, even more so for those who are self-employed. Low levels of confidence amongst these groups will have ramifications further up the housing chain so it’s imperative that more is done to support both segments of our society, particularly with levels of self-employment continuing to rise in the UK.

‘Raising a deposit is something that continues to be cited as the biggest hurdle by first time buyers, with a large proportion unable to do so without family help. With recent data showing house prices increasing by 2 per cent in the month of February, there seems to be no let up for first time buyers who are having to stump up more savings up front. House prices are inevitably impacted by demand and supply and more needs to be done to address the latter.

‘In the Housing White paper the Government stated it will focus on delivering the right type of housing in the right places through a new assessment of housing needs, and this is something we fully support to better provide for first time buyers.

‘Aldermore offers many products to help first time buyers who are struggling to gather a deposit, including the family guarantee mortgage and 95% mortgages for customers who have a smaller deposit. We always recommend customers to shop around to ensure they choose the best mortgage product for their needs.’

Aldermore takes a stand

First time buyers have a notoriously difficult time getting on the property ladder and for those who are self-employed, the issues escalate. This is why, following a review of its self-employed mortgage criteria, Aldermore has taken the decision to reduce the number of years accounts a self-employed borrower must provide when applying for a residential mortgage – from two years’ to one – taking into consideration profit retained within the business when assessing affordability.

These changes will provide applicants with additional flexibility and support, helping them to purchase their first home.

New Requirements for self-employed borrowers

Applications should be accompanied by, one year of accounts prepared by a suitably qualified accountant; accountant’s certificate, or SA302 and accompanying tax overview documents obtained from HMRC.

Unlike other lenders Aldermore will usually use the latest years’ figures rather than an average of the last two years when making the assessment, if net profit is level or rising.

Further reading on self-employed

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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