Anyone paying attention will have noticed that the world of work is changing. The term ‘gig economy’ has come into common parlance, often being used to describe an environment of questionable employment practices and labour disputes. But underlying the media noise is an identifiable trend in the number of people who are self-employed through choice, are successful, and are in it for the long term – and these people need mortgages.
The new normal
The millennial generation, in particular, have grown up knowing that a ‘job for life’ is as much an heirloom of their parents’ generation as VCRs and leg warmers. As a result, their attitude to work and career is very different. There are plenty of freelance roles which offer both good remuneration and a steady flow of contracts – examples would be IT developers and project managers in a range of industries. What’s more, people are remaining self-employed for longer than ever before, which, as well as confirming that self-employment is sustainable, has boosted the total number of UK self-employed hugely in recent years.
Slave to the algorithm
Traditional lenders’ ‘computer says no’ approach may work for those with a steady income, a predictable career path and simple, clear accounts, but they are unable to handle any level of complexity. This means that the ever-growing number of self-employed people are being failed. For example, a recent career change into self-employment is a likely red flag, even though an individual could potentially be earning more, or taking a step up in their career.
A different approach
Whether employed or self-employed, our underwriters review the borrower’s income for stability and consistency, and we take the time to verify that the repayments for the loan or mortgage are affordable in the event of stress on repayments. Having a clear understanding of the financial accounts of the borrower is important, and that’s why all of our underwriters are accountant-trained. We also have specialist accountants with lending mandates, and as such are ideally placed to deal with more complex cases.
Masthaven can provide a reliable, first-rate service to this woefully underserved demographic, and we began by catering to the self-employed through our second-charge mortgage product. In fact, 58% of all Masthaven second charge mortgage customers are self-employed, which we believe demonstrates our commitment to serving this market.
We also use digital technology to speed up the filtering process for our brokers and customers but do not use a score to determine whether we lend. Our belief is that credit scores don’t support customers who have strong career progression but have moved jobs a few times on the way up the ladder, nor those who move home frequently, even if to a superior property or to provide an improved position for their family. Credit scores don’t explain why a customer incurred a credit hiccup, nor give any indication of the many genuine reasons why this could have happened, such as job loss, divorce, accident, etc. There are many uses for computers in today’s technologically-driven world, but assessing an individual’s personal situation isn’t one of them.
All of the aforementioned reasons are why we believe in human-digital underwriting. Digital efficiency helps filter clear and obvious criteria quickly for our intermediary partners, and a well-trained underwriting expert that takes the time to understand the story behind the customer’s unique situation is essential to our mission to help find responsible solutions for our borrowers.
The self-employed are a growing sector of the market, and smaller, more agile lenders like Masthaven are ideally positioned to serve it. Lenders everywhere need to ensure that they adapt to changing work structures and that they take the time to understand their customers’ situations. Should lenders fail to do this, a large swathe of the population will struggle to improve their situations through either remortgaging or moving home – a scenario we believe is definitely not in the best interests of customers.