Securing a mortgage found to be more gruelling than arranging a wedding

Today's mortgage products are failing to meet the changing needs of prospective home-owners, according to the results of a new survey conducted by LendInvest which casts light on the issues faced by self-employed borrowers trying to secure a mortgage.

Related topics:  Finance,  Mortgages,  FTB,  Self Employed
Property | Reporter
6th June 2023
"An increasing number of people across the UK have different income streams that do not conform with outdated legacy platforms and processes, leading all too often to dispiriting ‘Computer Says No’-style responses."

The research conducted by LendInvest, with market research firm Opinium, revealed that self-employed individuals and workers with multiple or non-standard sources of income, as well as those with complex credit histories, think getting a mortgage is more difficult than:

1: Moving home (19%)

2: Arranging a wedding (14%)

3: Parenting (13%)

4: Applying for a new job (11%)

5: Buying a car (6%)

6: Opening a bank account (4%)

With 25% of respondents ranking getting a mortgage as the most difficult task, only flying a plane (49%) ranked as more difficult.

Esther Morley, Managing Director, Residential Mortgages at LendInvest commented:

“The research confirms our long-held belief that the traditional high street mortgage model is not fit for purpose for a large proportion of the UK population and is failing to keep pace with the increasingly complex needs of prospective homeowners.

“An increasing number of people across the UK have different income streams that do not conform with outdated legacy platforms and processes, leading all too often to dispiriting ‘Computer Says No’-style responses. Many are left navigating a needlessly complicated, intrusive and stressful process, resulting in hardworking people being denied the dream of owning their own home and suffering unnecessary mental anguish.”

Quick mortgage decisions proving difficult for more than a quarter of self-employed workers

LendInvest’s findings shine a light on the burden of the validation processes behind normal mortgages, and how that is amplified for self-employed workers compared to their salaried counterparts.

Of those who have experienced the process, 18% stated that providing suitable proof of income was difficult, rising to 22% for the self-employed. 28% of self-employed respondents said that getting a quick decision from a high-street lender proved difficult.

One-fifth of respondents also noted that finding someone to understand their situation was hard, with 29% saying they have felt discriminated against by a high street mortgage lender or bank due to their employment status or income streams.

Current mortgage offerings found to be inadequate

The research demonstrates how the current range of mortgage products on offer from lenders does not reflect the reality of many people from up and down Britain. More agreed (35%) than disagreed (29%) that there were not enough mortgage products available to suit their needs during the home-buying process.

26% said that they wouldn’t know how to apply for a mortgage, underlining a lack of knowledge and understanding when it comes to mortgages and home buying for many self-employed individuals and workers with varied and complex sources of income.

The broader macro environment is also playing into the perception of home buying more generally, with more than two-fifths (43%) agreeing that the cost of living crisis means they are less likely to become a homeowner.

Nearly a third fear being rejected when applying for a mortgage

For the self-employed and those in so-called “key worker” professions such as teachers, NHS workers, armed forces, police officers, and firefighters, fear of being rejected and the stress of the process were revealed as the two most significant barriers when asked about applying for a mortgage, at 32% and 28% respectively.

The mortgage process causes a negative emotional impact on applicants

LendInvest’s research uncovered the damaging effects on mental health that the mortgage process can bring about, especially for unsuccessful applicants. Those turned down were left feeling frustrated (41%), stressed (29%), embarrassed (28%), hopeless (20%), worthless (19%), and ashamed (19%).

48% of the respondents reported that they were negatively impacted by the application process, with 17% suffering adverse effects on their mental health, 16% taking a confidence knock, 14% finding planning for the future more difficult, 13% struggling to focus at work and 10% finding time spent with family was affected.

More than half have altered their life choices to increase their chances of getting a mortgage

51% of survey respondents noted that they have changed their life choices to improve the likelihood of a successful application. 22% have remained in a job they dislike for this reason. 14% have delayed retirement plans, 13% have chosen a higher salary over their dream job, and 11% have delayed or cancelled plans to become self-employed or freelance in order to increase their chances of getting accepted for a deal.

The effects were notably higher for ‘Generation Rent’ of 18-34-year-olds, with more than one quarter (28%) remaining in a job they disliked, and 21% choosing a higher salary instead of a dream job.

Rod Lockhart, Chief Executive Officer of LendInvest, commented:

“These results shed more light on the difficulties facing those with more complex cases applying for a mortgage and the general sentiment regarding the mortgage process during what is a difficult time for potential homeowners. It’s especially upsetting to see the emotional toll on a worryingly large number of people.

“Our residential mortgage products are designed to address the evolving needs of aspiring UK homeowners. With proprietary technology that streamlines applications and makes even the most complex cases simpler and faster, our aim is to improve the overall mortgage experience.”

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