Self-employed mortgage struggle for seven in 10

This is Money spoke to two freelancers about their struggles getting on the housing ladder. 

Daniel Mitchell, professional musician and tutor from Greater Manchester 

I have been a full-time freelancer since the start of 2019. I play a lot of one-off events through agencies, so it is very rare that I do long-term contracts – it is very much on a gig-to-gig basis. 

I do have regular teaching work, some of which is PAYE, which makes up around 10 per cent of my income. 

My partner and I were renting in central Manchester, but our landlord was wanting to put the rent up. We decided we should buy before we were priced out of the city. 

We started our search for a house at the end of 2019, and we had quite a dramatic start before finding a suitable house within our budget. 

At first we worked with a financial adviser who grossly overestimated the amount the banks would be willing to lend us – I don’t think he fully understood the nature of my work. 

We made an offer on a property, but we found the banks weren’t keen on lending us money because of my situation and we had to pull out of the sale. 

We then went to another firm of financial advisers who were more realistic about what we could expect. There was a good £15,000 difference in price between the previous property and the homes we were now looking at.

We found a house in Rochdale which we managed to complete on in September 2020. We feel really lucky to have managed to borrow the amount we did, especially during the pandemic. 

The lender only looked into my PAYE earnings, but luckily my partner holds a salaried position. She had to get a reassuring letter from her employer saying they had no intention of making redundancies because of the pandemic – if she was also self-employed, I dread to think what would have happened.

As a self-employed individual I felt like I was constantly under the microscope and that at any point the rug could just be torn out from under our feet. 

Even when we got the mortgage offer I was still constantly thinking that it was going get taken away from us at any moment. It was only when we had exchanged and completed that I felt that I could relax.

John Harris*, a sales agent from the South East of England 

My main business is supplying goods to tourist attractions in London. For the three years I have been working as a sole trader, business has been good, with profits building up year on year.

I live in a flat at the moment and I am looking to finally buy a house. I started looking this time last year, but when the pandemic hit and the housing market closed down I couldn’t continue with the process. 

Then, I had a mortgage agreement in principle to buy a home worth up to £450,000, but as you can imagine my income dropped off considerably due to the pandemic. My profits will have dropped by around two thirds. 

Previously, the banks said they would look at my last three years of accounts, so there was no problem getting a mortgage. What the banks are saying to me now is they just want to look at the current year and how Covid has affected my business.  

I’ve got a hefty deposit: over the three good years I had I lived in a small flat and I saved hard. I also have savings in the bank which would allow me repay the mortgage without a salary for two or three years. I’m in a good position, but the banks don’t seem to care about that.

If I was employed, it wouldn’t be such an issue. An employed person can be made redundant at any moment, whereas my business is just me and I won’t be giving up any time soon – I’ve been working hard to get it back up again.    

I haven’t taken Government grants to help top up my income – but I have heard from other people that, if I had, it might have affected my chances of getting a mortgage even further.

It’s really frustrating. Even when things open up again, I won’t be able to get a mortgage for another trading year. By that time, house prices might have increased by another eight per cent like they did last year.

*Name changed