contractor mortgage

Many self-employed people believe they are penalised for seeking contractor mortgages.

This has led to calls from an independent workers’ trade body and a leading financial advisory business for mortgage lenders to do more to support the self-employed according to an independent workers’ trade body and a leading financial advisory business.

IPSE – The Association of Independent Professionals and the Self-Employed – and CMME Group have also called on the UK Government to take action to improve access to lending for contractors and others in the self-employed sector.

The recommendations are contained in a new joint report by IPSE and CMME, Financial Wellbeing, which examines ways of improving access to financial services for independent workers.

Self-Employed are Penalised

Addressing contractor mortgages, the report says self-employed people are ‘underserved and penalised’.

It lists common challenges obtaining a mortgage for self-employed buyers. These include lenders often misunderstanding how the self-employed work and becoming entrenched in a risk-averse approach. The report says differing perceptions of independent workers between lenders makes it tough for would-be buyers to know who to approach and creates ‘the risk of drawing out the home-buying process as well as having an application rejected’

The report adds that many lenders lack the knowledge and capabilities to get the best outcomes for the self-employed. Instead of understanding how independent workers operate, generalist lenders use algorithms and automated assessments which can discriminate against the self-employed.

The Financial Wellbeing report says: ‘It’s no wonder that 50% of freelancers believe they won’t be treated fairly by lenders. New ways of working, including the growth of umbrella companies, have exploded over the past couple of years; without specialist knowledge of the sector, many lenders simply cannot keep pace with the big changes affecting the self-employed. For instance, some lenders are now requiring at least one to two years’ experience of contracting via an umbrella company as a prerequisite to obtaining a mortgage.

‘The self-employed are left underserved and penalised for their employment status.’

Higher Rates, Less Choice

IPSE and CMME warn that this means the self-employed are being left to navigate the industry for contractor mortgages alone, facing limited choices, higher rates and much more paperwork.

It states that 59% of the self-employed believe they were penalised in their mortgage application for the way they work.

‘By forcing the self-employed to jump through more hoops to receive a worse outcome, the process of buying a home is made more painful for the more than 4 million people who work for themselves’, the report says.

Worryingly, 47% of those surveyed said they remained with their current mortgage provider instead of seeking a potentially better deal because of the perceived difficulty of switching as a self-employed person.


The report makes four contractor mortgages recommendations:

  • Government and the mortgage industry should work together to explore tailored products and ways of making it easier for the self-employed to successfully apply for mortgages. This should include regular reviews to ensure lending criteria accurately assesses self-employed professionals’ financial situations and enables fair access to mortgage options.
  • Mortgage lenders should ensure they are fully open to working with brokers who specialise in servicing the self-employed. Strong collaboration between lenders and specialist brokers will help foster deeper understanding and fairer treatment of the self-employed. In turn, more self-employed professionals will be able to secure the mortgages they deserve based on their true financial standing and borrowing potential
  • Government should ensure that self-employed people who have made use of mortgage payment holidays, the SEISS scheme or the job retention scheme, are able to access other loans in future without being penalised. The borrowing potential of an individual should not be impacted by whether a business recovery loan or grant has been taken in the recent past. Clear guidelines should be laid down to ensure that mortgage applications are not treated unfairly as a direct result and that borrowing levels are not unduly reduced.
  • Modernise the tax and employment system to make it easier for lenders to assess freelancers’ financial situations and de-risk them as customers.

About IPSE and CMME

IPSE is the largest association of independent professionals in the UK, representing freelancers, contractors and consultants from every sector of the economy, and is owned and run by its members. IPSE believes that flexibility in the labour market is crucial to Britain’s economic success and dedicates its work to improving the landscape for the freelance way of working through an active and influential voice in government and industry.

The CMME Group is a leading UK mortgage and financial advisory service, specialising in the needs of independent professionals; SMEs, Contractors, Freelancers, Interim Managers and Directors. CMME believes the way people choose to work should not limit their choices in life and has spent the last 18 years working directly with banks, building societies and other providers to change the way they view this valuable and significant segment of the UK workforce.

Explaining why the Financial Wellbeing report was commissioned, they said: ‘Together, we are committed to creating greater awareness, better education and above all, parity across the UK workforce in gaining fair access to financial services solutions.

‘In this way we want to enhance the financial wellbeing of self-employed professionals and enable them to enjoy the financial peace of mind they deserve.’

To find out more about how CMME could assist you find the right mortgage deal for your circumstances, visit the website.