According to government statistics the number of self employed people is approaching 4 million, and there is an increasing trend of self employed.  But now we have a situation where around 4 million self employed people are struggling to get a mortgage, so why is this?

Put simply the new FSA regulations place more stringent tests on lenders to assess the affordability of a mortgage by new applicants.  For self employed this involves such checks that make it almost impossible to obtain a mortgage, for example:

• Self employed accounts going back several years – but what if you have only been self employed for 1 year?
• Those working in partnerships or directorships need to show evidence of turnover and profits for the last 3 years.

All of this is really quite absurd.  For example, as a business owner I may choose to live off a lower income and “invest” what would have been my income in new employees to grow the business.  Those employees can apply for mortgages after a few months evidence of salary, but as the owner you cannot, for some reason you are a higher risk than the people you are employing.  The logic does not add up.

To coin a phrase often used by financial firms as mandated by the FSA [past financial performance is not and indicator of future financial performance] it is also true to say that “past employment is not an indicator of future employment”.  The PAYE employee could apply for a mortgage today and be made redundant tomorrow. 

The reality, it appears, is that the FSA are “over regulating” mortgage lending, the result will mean unnecessary hardships for some and an adverse impact on the property market as some homeowners simply cannot afford to move as they are unable to get a new mortgage.