Borrowers who have been self-employed for just one year will be considered for a mortgage by Halifax after it revealed it had relaxed its income assessments.
Previously the lender asked for self-employed mortgage applicants to submit three years of signed-off accounts to prove they earned what they claimed.
Now it says it will accept two years of accounts as a minimum and in exceptional circumstances, the bank will also consider those who had worked for themselves for just 12 months.
Halifax says it is committed to supporting self-employed borrowers who need a mortgage
Borrowers will be able to apply for any deal from the Halifax range, but they will need to apply through a mortgage broker as the relaxed income standards are available only through Halifax’s broker arm, Halifax Intermediaries.
The move has been made to help those who are self-employed but struggle to move home or remortgage when they need to.
Ian Wilson, head of Halifax Intermediaries, said: ‘There are almost five million self-employed workers in the UK and almost 40 per cent of employment growth has come from the self-employed or small business owners over the past decade.
‘Adapting our policy to support self-employed people is part of our ongoing commitment to making it easier for them.’
Securing a mortgage if you’re self-employed has been much harder since tough new mortgage rules were brought in during 2014.
These made it mandatory for borrowers to prove their income, while lenders have to be able to demonstrate they have seen evidence of this and that the borrower can afford to repay the mortgage.
Many homeowners who took mortgages before these rules were brought in are now stuck with their existing lender because they no longer ‘fit’ the template income that lenders are looking for today.
David Hollingworth, of mortgage broker London & Country, said: ‘This kind of flexibility is improving although the self-employed with only a year of accounts will still be more limited in options.
‘Some specialist lenders can consider those with only one year of accounts but rates may be a little higher so it makes sense to consider mainstream lenders in the first place and if there is some track record of income, there may be an option available.’
Several smaller lenders that deal solely through mortgage brokers have begun to specialise in helping borrowers with more complex incomes including those with multiple jobs, who work on contract or whose income comes from multiple sources.
These include Paragon, The Mortgage Lender, Kensington Mortgages, Precise Mortgages, Aldermore, TSB, Virgin Money, Vida, Bluestone, OneSavings Bank and many of the small building societies.
Santander, Metro Bank and Coventry Building Society also offer good options for the self-employed, according to mortgage brokers.
Jonathan Harris, of mortgage broker Anderson Harris, said: ‘This is a sector that has been poorly represented and supported by mortgage lenders for sometime. The main issue has been a general lack of understanding from lenders regarding the way that the self-employed take their income and minimise unnecessary personal tax.
‘However, lenders have upped their game, recognising that the self-employed are heavily invested in their businesses and therefore represent a low risk to them.’
He added: ‘Scottish Widows, for example, is excellent with professionals, such as lawyers or doctors, buying into a practice and becoming self-employed and those becoming members of limited liability partnerships.’
If you have been self-employed for a number of years, then most lenders will be happy to entertain you and lend according to your income. How they calculate the amount they’ll let you borrow depends on how your business is structured.
Mark Harris, of mortgage broker SPF Private Clients, said: ‘If you have a track record of earning income through self employment, HSBC and Atom Bank have keenly-priced products.
‘But there are also those workers who have changed from employed to self-employed but have been so for a short period – should the applicant still be working in the same industry, Halifax can be flexible and look on the merits of the case.’
