Once again, self-employed workers across the UK have been dealt a major blow by several of the High Street’s biggest lenders. For the foreseeable future, mortgage applicants who declared themselves as self-employed will need to come up with much bigger deposits than the conventionally employed.
Even when conducting a nationwide mortgage comparison online, the self-employed have always had the short end of the stick. This week, TSB confirmed that it would once again reduce the maximum loan-to-values (LTV) and maximum loan to income (LTI) for self-employed borrowers across its entire mortgage portfolio.
To qualify for a mortgage with TBS, a self-employed applicant will now be expected to come up with at least 25% as a down payment. Also confirmed by TSB, the maximum LTI available for self-employed borrowers has been slashed to 4.25.
Meanwhile, conventionally employed mortgage customers will be able to borrow up to 4.49x their income, while being expected to provide a minimum deposit of 15%.
Justifying the alterations, TSB stated that it was necessary to reflect current market conditions.
“These are temporary changes to ensure our mortgages are in line with market conditions and so we’re able manage our service levels to support the demand from our customers,” read a statement from the lender.
Santander Follows Suit
Elsewhere, Santander has confirmed new lending restrictions wherein applications from self-employed individuals will face elevated scrutiny. As of now, self-employed applicants will be expected to provide detailed explanations (and accompanying evidence) as to how their businesses have survived the coronavirus restrictions.
Santander’s policy will be applicable to all new self-employed applicants, though may also be extended to those who already have applications in process. The lender indicated that even where a decision in principle has been offered, the applicant may be required to provide further evidence before their mortgage application is formally accepted.
In addition to explaining how and why their businesses were able to cope with the impact of COVID-19, self-employed applicants will also need to provide evidence of a stable and prosperous future for their business – irrespective of future lockdown restrictions or COVID-related complications.
Questions self-employed applicants can expect to be asked include the extent to which lockdown affected their income, whether their business had to suspend operations at any point, if the owner of the business applied for government assistance and how future profitability could be affected if the country goes into full lockdown once again.
“Santander remains committed, as a responsible lender, to supporting self-employed customers applying for a mortgage up to 85% LTV,” explained Helen Harrison, head of sales at Santander.
“The recent changes to our evidence requirements will help us to continue to work with customers to fully understand any recent impacts on their business and ensure that any borrowing remains affordable.”
NatWest and Nationwide Take Aim at the Self-Employed
Earlier this week, NatWest likewise confirmed its tightening of restrictions for self-employed individuals applying for mortgages.
Nationwide was one of the first to confirm its stricter lending policies for the self-employed, significantly reducing its maximum LTVs for self-employed applicants last month.
