For many self-employed professionals, company directors and business owners, obtaining a mortgage can be more challenging than it is for salaried employees. Irregular income patterns, fluctuating profits and complex business structures often make affordability assessments more difficult. However, proposed changes from the Financial Conduct Authority (FCA) could help address some of these challenges.
What is Changing?
The FCA has launched a consultation on a range of mortgage market reforms designed to give lenders greater flexibility when assessing borrowers. The proposals are intended to reflect modern working patterns and could benefit groups that have traditionally found it harder to access mortgage finance, including:
- Self-employed individuals
- Company directors
- Freelancers and contractors
- First-time buyers
- Older borrowers
- People with variable income streams
The regulator’s aim is to help lenders take a more complete view of an applicant’s financial position while maintaining appropriate consumer protections.
Why This Matters for Self-Employed Borrowers
One of the key challenges for self-employed applicants is demonstrating consistent income. Many lenders rely heavily on historic accounts and tax returns, which may not always reflect a business’s current performance.
Under the FCA’s proposals, lenders could have greater flexibility to assess affordability based on an individual’s full financial circumstances rather than relying solely on traditional criteria. The reforms also seek to make it easier for lenders to offer repayment structures that better accommodate variable income patterns. For business owners whose income fluctuates throughout the year, this could lead to a more tailored approach to mortgage underwriting.
Other Proposed Changes
The consultation also includes proposals to:
- Review rules surrounding interest-only mortgages
- Reduce barriers for borrowers with minor or historic credit issues
- Improve access to retirement interest-only mortgages
- Support more flexible lending arrangements for people with non-standard income sources
While these changes would not guarantee mortgage approval, they could widen the range of options available to borrowers who have previously struggled to meet standard lending criteria.
What Should Business Owners Do Now?
The proposals are currently under consultation and have not yet become formal rules. Any changes will take time to work through the regulatory process and be adopted by lenders.
In the meantime, self-employed individuals can improve their mortgage prospects by:
- Keeping accounting records up to date
- Filing tax returns promptly
- Maintaining accurate management accounts
- Minimising unexplained fluctuations in drawings or dividends
- Seeking professional advice before applying for a mortgage
How We Can Help
As accountants, we regularly support business owners, freelancers and company directors who are preparing mortgage applications. If you are considering a mortgage application and would like to understand how your business finances may affect your borrowing options, contact our team for advice.