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Do you expect to see less or more second charge mortgage lenders in 2018?

78% believe self-employed second charge products are competitive

78% believe self-employed second charge products are competitive

Second charge products for the self-employed have been praised for being much closer aligned to the requirements of borrowers and flexibility.

A recent poll conducted by Loan Talk found that 78% of respondents felt that self-employed second charge products were competitive with 22% voting against.

At the end of August, specialist lender Together revealed it was reducing the required tax calculations for self-employed applicants, while the specialist intermediary-only lender The Mortgage Lender launched in July with the aim of providing products for self-employed workers.

Sebastian Riemann of Libra Financial Planning Ltd wasn’t surprised by the results of the poll.

“The second charge self-employment criteria and products are much closer aligned to the requirements of the borrowers and also retain a flexible element, rather than the rigid model applied to first charge lending.

“Thus, the second charge lending is able to cater for a larger demographic than first charges, enhancing their appeal.

 “Currently, the second charge market offers a good alternative to self-employed borrowers, in particular for those with little track record or complex income structures.”

Sam Kirtikar, managing director at Clever Lending, reported that it was seeing more products being released by lenders to support the growing number of self-employed people.

“Products are out there whether the client has just one year of trading or is well established in their business. 

“We're definitely seeing lenders softening in their approach to the self-employed and I think the market will continue to grow in supplying products for this often underserved sector of the market.”

Tony Marshall, managing director at Equifinance, said the lender had catered for self-employed clients since its inception and felt it was crucial that the second charge sector continued to provide for that market.

"Regarding product development, the self-employed and, in particular, contract-type work does from time to time mean that the applicant will be between projects and, as such, income volatility becomes a factor, therefore, there may be a real case for products that allow for payment breaks to accommodate this along with perhaps the ability to overpay throughout the term without penalty.

“In addition, and not solely for the self-employed, products that allow for drawdown may begin to be explored, developed and appear.

Meanwhile, Martin Stewart, director of London Money Loans, believed there shouldn’t be any differentiation between employed and self-employed.

“Borrowing is borrowing as the PM might say and how that money is derived should not necessarily be a factor in the cost of funds, provided it is created legally and adequately proven.

“I'm not here to tell banks how to run their models, but I am here as someone who worked for themselves for 25 years.

“I would like to see both the first and second charge sector take a closer look at the changing work habits of the country and develop their proposition to accommodate those changes.

“There will be more self-employed, freelance and limited company owners going forward, so let's embrace their courage and lend to them fairly and equally.”

Sebastian agreed and concluded: “We are hopeful that the market develops in a positive manner, [so that] not just employed workers … benefit, but to avoid discriminating against those who are confident in their abilities and are willing to take calculated risks for long-term gains.

“Small and medium businesses are making up an ever-increasing part of the British economy and, as such, it is imperative that this sector is supported appropriately.”

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