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Self-employed mortgage market is ‘no fad’

Evidence of the growing sustainability of the self-employed mortgage sector has been reinforced as the latest data from Knowledge Bank’s revealed it was the most searched for criteria in the residential market.

Lenders who would accept self-employed applicants with one year’s worth of accounts have now been the top search on its Criteria Activity Tracker for three months.

Revealing its top five most searched criteria in November, Knowledge Bank also reported a strong leaning towards higher loan-to-value (LTV) mortgages – a trend which has continued from last month.

Knowledge Bank revealed ‘maximum LTV’ was one of the top five searches in six out of eight product categories within its system.

Buy-to-let

Within buy-to-let, the most commonly searched for criteria was ‘lending to limited companies’ which suggested, said Knowledge Bank, borrowers were looking for the most tax-efficient ways to enter the market.

There was also a focus on entering the sector too, with ‘first-time landlord’ and ‘first-time buyers’ being amongst the most popular searches.

Residential

Within residential mortgages, the top search was for lenders who would accept self-employed applicants with only one year’s accounts. This is the third month it has appeared as the most common search.

Knowledge Bank said it highlighted the self-employed market was ‘certainly no fad’ but a sustained borrower segment.

Help-to-buy and equity loan schemes also made it into the top five searches for the first time in 2018, highlighting the diversity of borrower requirement brokers face on a daily basis.

Equity release

In the equity release sector the top search was for early repayment charges. Knowledge Bank said this reflected the burgeoning product options in the equity release sector and the desire for borrowers to understand any restrictions, should they find an alternative loan solution in the future.

Comment

Nicola Firth, CEO of Knowledge Bank, said its tracker showed activity at the ‘coal face’ of broker activity.

She added: “As we approach the end of the year the pressure on brokers to find lenders for their clients’ mortgage needs becomes more and more intense.

“As a result it’s crucial that no time is wasted trying to pair borrowers with lenders whose criteria simply excludes them.

“As you can see from this month’s activity tracker although some searches remain popular from month to month new search topics are regularly breaking into the top five.

“This is partly due to ever-changing and complex borrower requirements and also as a result of product innovation from lenders that opens up borrowing opportunities. With this constant change it’s crucial that brokers use the tools at their disposal to make their advice process even more focused and productive.”

Top five searches performed by brokers on Knowledge Bank by brokers during November 2018 (Source: Knowledge Bank):

RESIDENTIAL BUY-TO-LET SECOND CHARGE EQUITY RELEASE
1 Self Employed – 1 year’s accounts Lending to limited companies Maximum loan to value Early repayment charges
2 Maximum loan to value First time landlord Debt Management Plan (DMP) – Ongoing / Current Minimum borrowing / loan amount
3 Maximum age at end of term / loan to age First time buyers Interest Only Downsizing protection option
4 Overtime – fluctuating Requirement to be a homeowner / owner occupier Maximum borrowing / loan amount Home reversion plans – early vacancy guarantee
5 Help to buy / equity loan scheme Maximum loan to value Consumer buy to lets Ex-council / Local Authority houses
SELF BUILD BRIDGING OVERSEAS COMMERCIAL
1 Maximum loan to value Regulated bridging Self-employed – Director / Limited company Semi-commercial properties
2 Accountant’s letter / certificate – accepted Maximum LTV for bridging Lending to limited companies Maximum loan to value
3 Stage payment type – advance Development bridging – maximum loan to cost Minimum income – interest only / part and part single applicant Commercial Investment Mortgages
4 Retained / additional property in the background Bridging – maximum borrowing / loan amount Limited company to a sole trader Commercial owner occupier
5 Self Employed – 1 Years Accounts Minimum borrowing / loan amount Buy-to-let Planning permissions

Source: Mortgage Finance Gazette