Consumer journalist Christine Toner looks at why freelancers fear mortgage rejection, how borrowers are seeking certainty and the increasing appeal of cashback mortgages
Around one million freelance workers are considering quitting because they fear they will struggle to get a mortgage, new research has revealed.
In a survey by The Mortgage Lender, one in five freelancers said they were reconsidering their employment situation because they had either been refused a mortgage or worried that they would be as a result of being freelance.
The research claimed banks are discriminating against self-employed people, despite 4.9 million people in the UK working for themselves.
Borrowers seeking fixed rates
More and more borrowers are opting for fixed-rate mortgages as uncertainty about what will happen post-Brexit takes hold.
According to figures from Experian, in November 84% of mortgage shoppers were searching for fixed-rate deals, up from 74% in September.
Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “Mortgage shoppers have switched their attention to fixed-term mortgage deals to protect themselves from any future rate rises.
“But it’s important for potential homeowners to consider all their options – after all, buying a house is likely to be the largest purchase anyone will make.
“If people are either on a standard variable rate, or approaching the end of their introductory deal, then now is the time find the next mortgage as the potential savings are significant.”
Cashback deals on the rise
The number of mortgage deals offering cashback incentives is increasing, according to Moneyfacts.co.uk.
There are currently 1,459 residential products available with cashback offers, almost two-and-a-half times more than the number in November 2011, when it stood at 627. According to Moneyfacts these deals now make up 29% of the overall mortgage market, up from 19% in 2011.
Darren Cook, finance expert at Moneyfacts.co.uk says: “Buying a new home or remortgaging your existing deal can be an expensive process. An offer that contains cashback may help to soften the immediate costs that this process incurs.”
But Paula Higgins, chief executive at HomeOwners Alliance warned that borrowers shouldn’t be too swayed by incentives.
“Don’t be lured in by offers of cashback. Look at the cost of the mortgage overall. It’s essential to seek unbiased advice from a broker and consider all factors before choosing a mortgage,” she says.