Nearly half of self-employed individuals seeking mortgages have postponed or abandoned their applications due to challenges associated with irregular income, according to recent research highlighting difficulties faced by borrowers with non-traditional work patterns. The findings emphasize the need for lenders and policymakers to adapt mortgage criteria to better accommodate evolving employment trends.

The study, conducted by Nottingham Building Society, surveyed 2,000 prospective borrowers and 500 mortgage brokers to assess barriers faced by those submitting applications categorized as “non-standard.” This group includes contract workers, individuals with multiple income streams, and those paid irregularly. The report concludes that mortgage lending practices have not kept pace with changes in the labor market over the past three decades, particularly the rise of the gig economy, portfolio careers, and side jobs.

Aaron Shinwell, chief lending officer at Nottingham Building Society, remarked that self-employment and varied income sources have become common for millions of people, yet many lenders continue to view such profiles as uncommon rather than typical. This disconnect has contributed to a significant proportion of self-employed borrowers feeling discouraged from pursuing home loans.

The research found that 27 percent of recent homebuyers delayed or abandoned mortgage applications due to the nature of their earnings, with the figure rising to 49 percent among self-employed applicants specifically. While the percentage of self-employed workers in the UK dipped during the COVID-19 pandemic, it has since rebounded to around 13 percent nationally and more than 16 percent in London. Meanwhile, more than two-thirds of brokers surveyed believe that non-standard income borrowers are likely to become the majority in the mortgage market, with nearly a third contending this has already occurred.

The report also highlights additional challenges faced by individuals with limited credit histories, such as returning expats without UK credit records, as well as those who have experienced financial interruptions due to bereavement or illness. These factors can further impede access to mortgage financing.

Lenders’ approaches vary, with building societies often better positioned to assess applicants with unusual circumstances due to their capacity for case-by-case evaluation. In contrast, larger retail banks tend to rely more heavily on automation and electronic processing, handling a higher volume of applications. The research notes that unsuccessful attempts can lead non-standard borrowers to assume rejection is inevitable across the market, though differing affordability assessments mean some lenders are more accommodating, particularly toward contract workers or overseas nationals.

This study underscores ongoing concerns about the mortgage market’s readiness to serve a changing workforce and suggests that broader reforms may be necessary to ensure equitable access to homeownership.