In the UK, 5million workers are self-employed, which is equivalent to 15% of the entire workforce. If you fall into this bracket, you may have been adversely affected by the Coronavirus. While permanent employees who cannot work due to isolation will receive 80% of their wages from the Government, the support available for the self-employed excludes individuals working via their own limited company. So what happens if you’re a freelancer or contractor who’s facing work uncertainty, but you were planning on moving house or are looking for a new property? In this article, we’ll offer vital property advice designed to help you navigate the market for the next few months…
According to a Government spokesperson, renters and homebuyers should avoid moving house during the Coronavirus epidemic. This will ensure social distancing rules are adhered to and it will minimize the spread of the virus. Of course, people still need places to live, and few can simply abandon their purchases – so in this case, it’s best to just be as careful as possible.
However, self-employed individuals will attest that COVID-19 may just be one of the many challenges they face when it comes to moving home. For the typical UK self-employed individual, buying a house can be a bumpy ride at the best of times.
Getting a mortgage when you’re self-employed can be complicated. Data from HomeOwners Alliance indicate that since 2010, only 10% of home loans have been given to self-employed individuals. Furthermore, Trussle reports that self-employed individuals have a harder time getting a mortgage compared to retirees and those with bad credit.
While a good credit history may boost your ability to get a mortgage, this isn’t the only thing lenders look for. Many will ask for three years’ worth of SA302s before they accept a mortgage application. A self-employed worker’s irregular earnings may also hinder getting a mortgage application accepted. Lenders want to see a track record of regular work or a record of work lined up for the future.
The COVID-19 epidemic may make it even harder to get a mortgage now and in the future for the self-employed. After all, economic uncertainty could result in irregular income and earnings gaps for independent workers. A survey conducted by Vox indicates that 75% of the surveyed self-employed workers reported earning less due to the pandemic compared to a quarter of the salaried workers.
Firstly, you need to meet the basic requirements when it comes to applying for a home mortgage:
You also need to have the following documents ready for your lender:
If you’re new in business, some lenders will accept a one-year or a two-year earnings record. However, other lenders will ask you to pay a higher deposit and a higher mortgage rate compared to those with a three-year record. A good credit rating plus a higher declared income will also improve your chances of securing a higher loan. You may also consider seeking the advice of a mortgage broker as they may know a lender willing to give you a mortgage. As always, it’s worth shopping around for the right lender.
Coronavirus has negatively impacted many sectors, the housing market included. In the past, the UK housing market has been surprisingly resilient to economic uncertainty and downturns. However, COVID-19 presents a new challenge and many people are understandably worried, as evidenced by this tweet by property expert, Henry Pryor.
With the future of the virus unknown, it’s difficult for anyone to predict how Coronavirus will affect the property market in the long-term. Much of the outlook for the market will depend on how long the shutdown remains in place, whether there is credit tightening and a surge in unemployment when the housing market reopens, according to Niraj Shah, an economist at Bloomberg Economics.
“This is a shutdown, not a crash,” said Shah, who added: “Recent events mean the property market is being put into an induced coma. That is likely to lead to a record drop in property transactions – not prices.”
So, though momentum and exchanges will slow down as more people remain home, the overarching view is that the market isn’t expected to grind to a halt or crash. Rental growth is also likely to slow down in the short-term, but experts predict these effects to be short-lived.
If you recently found the right property and need to move, don’t be worried about the uncertainty. Right now it’s a buyer’s market, so you’ll likely get a good deal as demand is low. Furthermore, The Bank of England recently made a cut to interest rates, bringing the base rate down to just 0.1%, making it a great time to take on a contractor mortgage.
Of course, if you’re just browsing, though the Government advises not to move as things stand, you can still do the following:
Don’t forget to remain optimistic as COVID-19 shall pass. Author, Samantha Bell, is part of the marketing team at Portico, a leading London estate agent.