Mortgage lenders are adopting stricter criteria for self-employed workers, thanks to the pandemic.
Natwest won't accept applications from people who took income support grants from the government and other lenders are tightening the purse strings on the amount they will let self-employed workers borrow.
Now, a third of self-employed renters don't believe they'll ever be able to buy their own home, according to research from Aldermore Bank.
Here, Which? explains the challenges facing self-employed borrowers and offers advice on how to boost your chances of getting a home loan.
A new report by Aldermore has shown how the challenges faced by self-employed workers have been worsened by Covid-19.
More than a quarter of self-employed people (28%) told Aldermore that saving a deposit had become more difficult due to the pandemic, while one in five (18%) said they'd been forced to delay their plans to buy a home.
The biggest issues were around getting accepted for a mortgage. 64% of respondents said they believed banks treat self-employed people worse than those in salaried employment, while 32% said they'd been rejected simply for being self-employed.
Jon Cooper of Aldermore says: 'It is disappointing to see persistent barriers for self-employed people looking to secure a mortgage, which appear to have been exacerbated by the pandemic.
'Self-employed workers with seasonal or variable income streams may not fit the tick-box approach of many high-street lenders, but specialist lenders can dig into the detail to ensure they have opportunities to get on to the housing ladder'.
Getting a mortgage as a self-employed worker has always been more complicated, but the pandemic has added greater uncertainty, with banks reluctant to take on what they perceive to be 'riskier' lending.
Lenders are adopting stricter criteria than before. Natwest won't accept applications from people who took income support grants from the government, while HSBC and Yorkshire Building Society require evidence that the company has recovered from the pandemic.
TSB, meanwhile, will only allow self-employed people to borrow 4.25 times their annual income, compared to 4.75 times for non-self-employed workers earning over £40,000.
Other lenders are asking for bigger deposits. Santander is only offering self-employed mortgages at up to 75% loan-to-value (LTV), Metro Bank has set an 80% limit for those who've taken income support grants, and Nationwide will only lend at up to 85%.
This might paint a bleak picture for self-employed borrowers, but there are some glimmers of hope.
Santander requires bigger deposits than before, but it has taken the lead in allowing applicants to disregard their accounts from the 2020/21 tax year. Natwest, meanwhile, has announced it will launch new self-employed criteria next week.
The situation is ever-changing at the moment, resulting in wildly differing criteria and a risk-averse approach from lenders, but if the economy recovers well from the pandemic, banks may begin to loosen the purse strings.
In the meantime, self-employed applicants may have greater joy considering building societies and specialist lenders, who may assess applications on a case-by-case basis rather than using blanket eligibility criteria.