"There is not yet consensus on how to approach self-employed borrowers; each lender is adjusting criteria, but the overall trend is seeing restrictions lifted, albeit cautiously."
Traditionally a quieter month, lenders were revamping criteria for self-employed borrowers, there were also a raft of green products launched and, fittingly for August, holiday let products, amongst plenty of other changes.
Let’s jump in to the key announcements from lenders.
WC 2nd August
The first week of August started with a bang as lenders made over 200 criteria changes in the first few days of the month.
Amongst the key changes from lenders, was a new holiday buy-to-let product from The Melton. With the staycation boom looking set to continue into 2022 according to holiday letting website Unusual, The Melton announced a new buy-to-let product which has no upper age limit, and is available to first-time buyers, first-time landlords and non-owner occupiers.
Income assessment and affordability was in the spotlight throughout the month, and Ipswich Building Society amended its criteria to include pension assets when assessing affordability. This follows another trend that has been popular across the month, lending into retirement. With house prices still continuing to climb, more borrowers are stretching mortgage terms, and the Knowledge Bank criteria tracker found that ‘maximum age at end of term’ was the term most-searched by brokers in August.
Energy efficiency is also top of mind for lenders, as Leeds Building Society launched its first green mortgage deals. The lender announced two new cashback mortgages are available on properties with an energy efficiency rating of A-C.
WC 9th August
There was positive news for self-employed borrowers in the second week of August, as Ipswich Building Society announced it would offer up to 90% LTV to freelance applicants. The lender also declared it will accept applicants who had used government support loans, or self-employed grants, as long as these were taken in 2020.
HSBC also announced it was changing how it evidences income from self-employed applicants. It will no longer require statements from January, February or March 2020 in addition to the latest 60 days statements.
Following on from the previous weeks’ announcement from Ipswich Building Society around pension criteria, later life lending was again of interest. Canada Life launched a new equity release product range to support older borrowers. The later life lending specialist says these options allow repayment contributions of up to 10% of the initial loan each year, and these contributions are exempt from early repayment charges. This allows customers to borrow cash against their home with the option to let interest roll up, or make overpayments.
WC 16th August
The third week of August began with more positive news for self-employed applicants. NatWest announced it will accept applications from self-employed customers who have previously received a self-employed income support scheme grant, providing this is not within the three months preceding the application.
As landlords look to capitalise on the ongoing interest in staycations, Loughborough Building Society added a holiday let product to its mortgage range. It’s available for the purchase or remortgage of properties in England and Wales that are managed by a letting agent and used for short term holiday letting, including Airbnb.
WC 23rd August
Lenders continued to amend affordability criteria as the month progressed, with Skipton Building Society changing its variable income criteria. The lender will now accept up to 100% of regular variable income, for instance quarterly bonuses, into a customer’s income calculation.
Similarly, Masthaven announced it will now accept additional earnings, like bonuses and overtime, to be included in affordability.
There were further changes to lenders’ approach to self-employed borrowers who have taken out government support loans, with Mansfield Building Society willing to consider those who have taken SEISS grants. The lender also announced it has increased its LTV to 95% for freelance applicants.
WC 30th August
In the last few days of August, Aldermore Bank refreshed its residential mortgage range, reintroducing its 95% LTV residential mortgage, and reduced rates on a number of residential products.
A lot of lenders’ attention in August was focused on adjusting criteria for self-employed borrowers. With a significant number of freelancers now recovering as we head towards normality, income is stabilising and lenders are evaluating their positions.
There is not yet consensus on how to approach self-employed borrowers; each lender is adjusting criteria, but the overall trend is seeing restrictions lifted, albeit cautiously.
In the coming weeks there will certainly be more lenders shifting criteria for self-employed borrowers and brokers will need to stay on top of the latest trends. With such a hive of activity in the self-employed arena, Knowledge Bank is launching a new category specifically for lenders’ self-employed criteria, and brokers working with freelance clients will certainly benefit from the new category.
