72% of business owners say self-employment makes it harder to get a mortgage

Nearly three-quarters (72%) of business owners think self-employment makes it harder to get a mortgage, according to Pepper Money's Specialist Lending Study.

Amongst this group, the study found that 46% think self-employment makes it a lot more difficult to get a mortgage.

This is despite the survey showing that 29% of self-employed people made at least 10% more profit in the last year compared to the preceding two years, with 15% saying they have made at least 20% more profit in the last year.

Ryan Brailsford, director of business development at Pepper Money, said: “The Pepper Money Specialist Lending Study has found that self-employment continues to be seen as a significant challenge when it comes to getting a mortgage, and this often comes down to proving affordability.

“Many lenders will base affordability calculations for self-employed customers on an average of their last three years’ submitted accounts, yet our research shows that nearly a third of business owners have increased their income by at least 10% over the last 12 months. 

“Similarly, there are often occasions where a limited company director may decide to retain some of the net profit within the business instead of paying it all as dividends. This can help reduce their personal tax liability, but it also limits their borrowing power when applying for a mortgage.

“By working with a lender, like Pepper Money, that can make affordability calculations based on one year’s accounts, or even consider retained net profit as part of the calculation, brokers can help to maximise the affordability of their self-employed customers and increase their opportunity.”