Brokers: Are you broadening your panel of lenders for self employed people, and why/why not?

Journalist: Les Steed, AE3 Media / Mortgage Solutions

ended 31. May 2022

Are you broadening your panel of lenders for self employed people, and why/why not?

  • Has the panel of lenders you rely on for self-employed changed significantly? 
  • Which lenders are your top three go-to’s for self employed cases?
  • Have you had any major self employed cases that you still couldn’t place?
  • What type of complex case do you find most challenging to place?

7 responses from the Newspage community

Brokers don’t actively choose a lender panel. You’re either independent or restricted. The FCA doesn’t recognise the term ‘whole of market’ even though a number of brokers use that terminology, mainly because they aren’t allowed to say they’re independent, because the vast majority aren’t. The best lenders for self-employed people are Halifax and Halifax, followed closely in third place by Halifax. The most challenging cases to place are the ones where clients don’t give you the documentation you ask for in the format requested in the timescale you need.
Star Quote
We are always broadening our panel for self-employed people. Due to Covid, a number of lenders have changed the criteria and now need even more documents to prove an applicant's income. By having a larger selection of lenders available, it means we are able to offer the client either better terms with their mortgage or a lender where the process to getting their mortgage agreed is simplified. The panel of lenders we rely on is changing. For example, Santander used to be a great go-to lender for self employed people as they were one of only a few high street lenders that would accept the latest year's accounts for affordability. However, that changed about six months ago as they now average the accounts. They were also only allowing loans of up to 75% but this has changed in the past week or so back to 90%. Whereas before it was unusual for a lender to ask for business bank statements, many lenders now require this as part of the underwriting process. This is to check to make sure the business accounts show income consistent with what's showing on their self-employed accounts. Our three go-to lenders for the self-employed are currently Halifax, the Bank of Ireland and Together. The cases which are more difficult to place are those companies that may be showing a loss for the most recent year's accounts. Mortgages need to be sustainable, so without a good reason for the loss it can be difficult to place this. If the client has invested in things like stock, then this can sometimes be overcome. However, while there are challenges within this area, lenders are definitely broadening their criteria back to levels seen prior to the pandemic."
Accord amazed me on a self-employed case recently, regarding a sole trader who had had a child in the previous year and taken most of the year off. Her income was good three years ago, then almost zero for a year, and then back to normal. They used an average of years 1 and 3 to calculate affordability. They say they have a common sense approach to lending, and I think this shows they don't just talk the talk but walk the walk, too.
I'm very fortunate that, as part of The Openwork Partnership, I have access to a very comprehensive and wide-ranging panel of lenders, allowing me to cover most client situations. For those where I cannot directly assist then I have the support of various specialist partners that I can make a referral to. The upshot of this is there is very rarely a situation where I cannot assist a client in some way, shape or form. In the market as a whole, there is not really a "self-employed specialist" lender, nor is there really a need for one as most lenders will accommodate self-employed clients. The issue is what criteria they place on them, which varies greatly. Sometimes they want one year of trading, sometimes they want more. What about Limited Companies, is it salary plus net profit, or salary and dividends that is used? What about contractors, are they treated as employed, self-employed, or are there specific contractor criteria for this lender? Knowing how each lender will view a particular scenario, and more importantly how they will calculate income, is key to helping self-employed clients.
There is no one magical lender who is the best for the self-employed, the trick is to find an adviser who is a wizard with self-employed enquiries. As with all of these things, the devil is in the detail. If property finance was that simple it wouldn't need the vast breadth of skill and knowledge of expert advisers. One lender might be better for considering one year's self-employed accounts, and another for not penalising a person who has taken SEISS grants, and a different lender may be happy to consider a significant uplift in earnings without averaging it away. These are all client specific scenarios, the trick is to find an adviser, who is knowledgeable and diligent enough to identify and solve the problem before submitting the application to the lender.
We are already classed as "whole of market" excluding lenders where you can only go direct. But the shift is changing many lenders are becoming more sympathetic to the self employed, Lenders like Santander increasing the LTV and HSBC has always been great for affordability. But one thing that seems to be always neglected does not fall with the banks, many self employed people need educating in affordability, just because you pay yourself £X per month, does not mean that lenders will use that income, the only income used is what you declare to the HMRC, so if your expecting a low tax bill, you can also expect a low affordability when it comes to a mortgage.
Has the panel of lenders you rely on for self-employed changed significantly? Having never really stuck to a panel when it comes to self-employed clients it's always been around criteria and if the client fits affordability with a lender and is the lender competitive for the client's circumstances. Which lenders are your top three go-to’s for self employed cases? I personally don't have a top 3 for self employed as I am always driven by the clients own circumstances and then decide on which lender will allow them to borrow the money required. Have you had any major self employed cases that you still couldn’t place? & What type of complex case do you find most challenging to place? The only time a self-employed case is a problem is due to the income figures not actually matching on the tax calculations and overviews as at times clients can think they earn x per year but the tax calculation shows something considerably less which means they are unable to get the borrowing required.