How brokers can support non-PAYE workers on their homeownership journey

The learning objectives for this article are to:

While the journey to homeownership comes with its challenges, those outside of traditional employment face unique hurdles that can hinder their ability to secure a mortgage. Whilst the pandemic did see this figure drop slightly, there are still an estimated 4.24 million self-employed workers in the UK as of July 2024 revealing just how popular this employment type remains.

However, this does not seem to be reflected in the circumstances of those seeking to enter the housing market, with our research highlighting the continued barriers faced by ‘non-traditional workers’ when applying for a mortgage. This is often due to lenders having stricter criteria as they find it harder to lend to individuals with more volatile or complex income streams. Most notably, non-PAYE workers have pointed out the negative impact their employment status has which has resulted in many being rejected by mortgage lenders and fuelled beliefs that climbing the property ladder isn’t achievable. As such, brokers and lenders have an obligation to understand these concerns and acknowledge these roadblocks to homeownership before supporting their customer base with solutions.

The impact of employment status on property ambitions

Half (50%) of non-traditional workers we surveyed report that their employment status has negatively impacted their ambitions to buy a property in some way. This is a particularly prominent problem for gig economy workers (70%), but also for contractors (68%), zero-hour contract workers (60%), and freelancers (57%). Whilst the reasons for this can’t be boiled down to a single answer, a fifth (20%) of non-PAYE workers think their fluctuating income is the main reason why their property ownership ambitions have been pushed back. 

As such, 15% of individuals have had to rent for longer than they’d have liked, and 13% have even considered moving abroad to get on the property ladder which highlights the lengths individuals are willing to go to fulfil their ambition of owning a home. On a more worrying note, almost a fifth (17%) have considered abandoning their home ownership ambitions altogether, again, showcasing just how significant an issue this is.

How rejection is impacting confidence levels

Even when non-PAYE workers have gone ahead and applied for a mortgage they’ve found themselves at a disadvantage, with close to half (45%) reporting that they’ve had a mortgage application rejected. 

Though a minority, one in ten (9%) self-employed workers say they’ve never had an application accepted, with zero-hour contract workers being the most likely to have their application declined (21%). On a similar note, the research found that the professions most likely to be rejected were workers in the technical or craft sectors such as mechanics, plumbers, electricians and gardeners, with 15% having never had an application approved.

As previously explored, individuals point to their income as being a primary reason for being rejected. Of those who have experienced mortgage rejection in the past, 30% blame their profession as being considered too unsteady or irregular, whilst 28% state their application rejection was due to the volatile nature of their income. Other common reasons included low credit scores (27%), missed or late payments (24%), not having the necessary documentation (24%) and the lender not assessing the monthly payments as affordable (22%).

The assumption of being rejected for a mortgage 

This all adds up to the belief for some that mortgage applications are harder for non-PAYE workers and not worth pursuing, as reflected in our research which found that a quarter (25%) of non-PAYE workers have never applied for a mortgage due to fear of rejection. 18% say they have never applied for a mortgage because they’d heard it was more challenging for those who were self-employed, and 10% claimed they found the mortgage process too daunting and so never attempted to apply. Some have even been dissuaded from the process after hearing about poor experiences from friends or colleagues (7%) which adds to non-traditional worker’s reluctance to apply for a mortgage.

Due to these beliefs, a gap in awareness and education has formed and exacerbated the issue. One in ten said they didn’t know how to apply for a mortgage in the first place, and 8% admitted they didn’t even know who to speak to about getting one. 

How can lenders and brokers help?

This presents a prime opportunity for lenders and brokers to support non-traditional workers, whether this be through reviewing their mortgage application processes and criteria, sharing more information about the avenues available to homebuyers, or bringing more awareness to the issues faced by non-PAYE workers to encourage wider collective action. There is no doubt that non-PAYE workers offer vital contributions to the UK economy, and as such they deserve the appropriate support to enjoy the same service afforded to traditional workers. 

Specialist lending can be useful in these kinds of scenarios. At TML, we are geared towards real-life lending, which means paying more attention to applications to understand individual situations and how we can help. We also have vast amounts of experience working with complex cases, which means we have less stringent criteria in comparison to high-street lenders, making us a viable option for brokers looking to support self-employed or non-traditional workers.

Methodology: 

Research undertaken on behalf of The Mortgage Lender (TML) by Censuswide amongst 2000 ‘non-PAYE’ workers, including 1264 self-employed workers, 324 freelancers, 152 zero hour contract workers, and 102 gig economy workers. Fieldwork completed between 28th June 2024 and the 8th July 2024.