Self-employed homebuyers battle tighter mortgage rules

The housing dreams of millions of selfemployed people are being dashed as banks undertake painstaking analysis of mortgage applications.

Self- employed workers are being asked to provide significantly more paperwork than before the pandemic and mortgage firms are taking weeks to deliberate on applications that would normally be waved through.

There are fears the slowdown could cause house purchases to fall apart or sellers to shun self- employed homebuyers in favour of those who work full time.

In normal circumstances banks ask self-employed applicants to provide two years of accounts, with a small proportion of cases being selected for further examination by staff, usually from applicants who are borrowing large sums or have unusual circumstances.

Now mortgage providers are asking for multiple business bank statements and confirmation from accountants that their client’s business has not been affected by Covid-19.

Rather than a handful of applications being taken aside for further scrutiny, some banks are now requiring that all applications be reviewed by a member of staff. This process is called “manual underwriting” and can slow down applications, especially as many banks are operating with fewer staff.

Mark Harris of SPF Private Clients, a mortgage broker, said NatWest was one of the banks to carry out a manual review of every self-employed case.

Simon Gammon of Knight Frank

Finance, another broker, said even some borrowers with straightforward applications were suffering delays.

“There is clearly nervousness about the fact we might be about to see a lot of people lose their jobs and businesses go into a downturn,” he said.

“We have seen a change in the questions being asked and the level of information required by lenders is much greater. It means it takes longer for these mortgages to process.” What banks consider to be acceptable income has also shifted since the start of the pandemic. Workers who receive bonuses or commission have found it increasingly difficult for such income to be accepted by banks. Clydesdale, Nationwide and TSB are among the lenders that will no longer allow customers to use bonuses as part of their mortgage application.

As previously reported by Telegraph Money, some banks are denying applications from business owners who have furloughed their staff, even if their own personal finances have not been affected by the crisis. Mr Harris said: “Not all lenders will look at applicants where grants and support loans have been taken out.”

Delays to the mortgage process can have major repercussions for borrowers. A study by Opinium, a polling firm, and Butterfield Mortgages, a lender, found that 52pc of buyers had encountered problems with their property chain since the lockdown began.