One of the most striking features of the economic recovery is, according to the Bank of England, the record 4.5 million Britons who are now self-employed. The Bank says that self-employment rose by more than 200,000 in the three months to January and had accounted for almost half of the rise in employment since 2010.
Work and Pensions Secretary, Iain Duncan Smith was quick to jump on these figures, proclaiming: “This country has a great history of entrepreneurship and small businesses are in many ways the backbone of the UK economy.”
He went on to say that the entrepreneurial spirit is alive and well in the UK – and no part of society, it seems, is immune from the entrepreneurial bug.
According to the Office for National Statistics, those aged 50 and over have accounted for more than 70% of the increase in the number of self-employed since 2008. While the New Enterprise Allowance claims to have helped more than 40,000 former benefits claimants to start new businesses since 2011. And nearly two thirds of mothers with children under 10 are looking to become ‘mumpreneurs’ by starting a business from home in the next three years, according to research by an insurer.
With so many budding business owners emerging across the country, what do their prospects of securing a mortgage look like the new regulatory environment?
Confidence wasn’t high before MMR, with research from Precise Mortgages earlier in April saying that self-employed applicants are more pessimistic about their mortgage borrowing options that borrowers with a poor credit history. And we have already received phone calls from brokers asking whether Kensington will be able to continue to provide Self-Employed mortgages based on one year’s accounts?
Happily, for brokers and the growing army of business owners, the answer is yes.
MMR may cast a greater spotlight on outgoings as part of an affordability assessment, but the information a lender uses to validate income and verify affordability remains the lender’s choice, as long as it is able to justify the approach takes. And this means that our underlying lending policy for the self-employed remains unchanged.
With MMR tipped to swing the balance of distribution in favour of mortgage industries, and specialist lenders like Kensington still able to take an individual approach to the income of small business owners, the collision of new regulations and growing entrepreneurship promises to create an explosion of opportunity for mortgage brokers.