Self-employed borrowers driving specialist mortgage demand

Asked for the proportion of their business represented by different customer types typically classed as more difficult to find solutions for in Q4 2017, intermediaries said that self-employed customers dominated, representing one in five of all cases (21%).

This mirrors the sharp rise in the number of self-employed in the UK, up 24% over the last ten years from 3.9 million to almost 4.8 million in the final quarter of 2017 according to the ONS.

After self-employed business, intermediaries identified interest only (15%), complex income (14%), high loan-to-value (14%) and lending into retirement (11%) as the next most popular types of specialist mortgage business.

In contrast, low income business made up just 7% of specialist mortgage applications in Q4 2017, with adverse credit business lower still at 6%.

Adverse credit has consistently been the least dominant factor in the requirement for specialist mortgage lending since the FACT Index report began tracking specialist residential lending characteristics in March 2015.

Alongside specialist residential mortgages, more than a quarter of intermediaries (26%) said that they expect to increase second charge mortgage business in the next 12 months, stating that second charge mortgage lending represented a viable alternative to remortgaging and further advances for certain customers.

John Heron, Managing Director of Mortgages at Paragon said:

“It seems clear from this latest research that complexity around employment and income are the most significant reasons that intermediaries review the options available from specialist residential lenders. Customers with these characteristics are more likely to benefit from the detailed individual approach to underwriting that lenders in this segment of the mortgage market can deliver. With employment patterns continuing to become increasingly diverse and complex, we may well see this area of the market expanding going forward.”