Lenders relax rules for self-employed borrowers

Christina Hoghton
Written By:
Christina Hoghton

Lending got tougher for the self-employed during the Covid crisis but some banks are beginning to relax their criteria for those who work for themselves

Mortgage lenders are starting to relax their lending criteria to the self-employed, with NatWest the latest to reduce its lending restrictions.

The lender has changed its criteria to now accept self-employed borrowers who have historically taken out Self Employed Income Support Scheme (SEISS) grants.

It will now accept applications from self-employed borrowers who had received an SEISS grant as long as it was not in the last three months.

NatWest will assess affordability by using an average of the last two years or the most recent year’s income, whichever was lower, and look at the last three months’ business bank statements to assess its ability to sustain a declared level of income.

NatWest previously said that it would not accept applications from customers who have applied for an SEISS grant on or after 14 July 2020 but said that it would unveil a new criteria change in August.

HSBC changes

HSBC has also softened its lending rules for those who work themselves. It will no longer ask self-employed applicants to provide bank statements from the first three months of 2020.

The bank previously requested this information to compare how businesses were performing before the pandemic to their trading levels now by asking for the latest 60 days of statements.

HSBC will now ask for just the latest three months’ bank statements and two years of accounts.

The bank will still deduct grants and loan repayments from an applicant’s net profit to determine affordability.

A HSBC spokesperson: “In order to support self-employed mortgage applicants we have updated our policy, making it easier and quicker for them to get a mortgage with us, whilst ensuring we have the information needed to make an appropriate affordability assessment.”