Home ownership out of reach for most self-employed

62% of self-employed people do not know how they’ll pay for the first home.

Although getting onto the property ladder can be difficult for all first-time buyers, the latest data from the specialist bank Aldermore revealed that the self-employed might be at more of a disadvantage.

Aldermore’s First Time Buyer Index showed that 68% of self-employed first-time buyers thought that getting onto the property ladder was tough – 62% are unsure how they will ever manage it.

Just under a third of self-employed respondents thought the biggest obstacle would be raising the deposit in the first place (32%) whilst securing a mortgage was the seen as the toughest challenge for 14%. For those saving up for a deposit, 12% stated that they had to take on an additional job to top up their earnings. Of those who had purchased a home recently, however, 32% said things became so difficult that they had to give up their self-employment in order to get a mortgage.

In addition to financial pressure, the data also indicated that many first-time buyers felt further pressure from numerous other sources. Just under one in five (18%) stated they face pressure from their partner to get on to the housing ladder, with a further 18% feeling pressured by their families.

In order to save for a deposit, cutting back on things was also a common theme among first-time buyers. 23% have cut out going on holiday, whilst 30% stated that they sacrificed eating out in order to build up their funds. Working longer hours was another approach, taken by just over one in five (21%).

On the whole, the main challenge for all respondents was getting on the housing ladder in the first place. 35% stated that raising a deposit was the most significant obstacle, a figure has declined slightly from 39% in Q4 of 2016. 26% of first-time buyers will look to their parents for financial help, dropping just a percentage point from Q4. Similarly, the number of people joining forces with their partner to pay for a deposit has grown; from 38% in Q4 to 45%. This hasn’t stopped mortgage affordability worries growing from last year’s 6% to 10% in 2017.

For those who’ve been through the process recently, the main problem was saving for the deposit (18%) whilst 10% found the overall process difficult.

However, a change in the system has been called for, with a significant portion of first-time buyers expressing this view.

The key request from 46% was to address the growing cost of buying a home, with 39% welcoming an extension of the Government’s Help to Buy schemes. 30% felt that to improve the system for buyers, the whole house buying process should be made simpler.

Over a third (37%) of self-employed individuals felt that introducing better mortgage products would improve things, in addition to altering the criteria for borrowers who are self-employed (33%).

Commenting on the figures was Charles McDowell. Aldermore’s Commercial Director, Mortgages, stated:

“First-time buyers are the driving force of the property market but our Index reveals just how hard it is for them to get on the ladder, even more so for those who are self-employed. Low levels of confidence amongst these groups will have ramifications further up the housing chain so it’s imperative that more is done to support both segments of our society, particularly with levels of self-employment continuing to rise in the UK.

“Raising a deposit is something that continues to be cited as the biggest hurdle by first-time buyers, with a large proportion unable to do so without family help. With recent data showing house prices increasing by 2% in the month of February, there seems to be no let up for first-time buyers who are having to stump up more savings up front. House prices are inevitably impacted by demand and supply and more needs to be done to address the latter.

“In the Housing White paper, the Government stated it will focus on delivering the right type of housing in the right places through a new assessment of housing needs, and this is something we fully support to better provide for first-time buyers.

“Aldermore offers many products to help first-time buyers who are struggling to gather a deposit, including the family guarantee mortgage and 95% mortgages for customers who have a smaller deposit. We always recommend customers to shop around to ensure they choose the best mortgage product for their needs.”

 

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