The shift to flexible working and the cost of living crisis will lock half a million homebuyers out of the property market, new research has shown.
The rise of the gig economy and shift to part-time working has meant buyers increasingly struggle to meet mainstream lenders’ criteria. The cost of living crisis has also made it more difficult to pass so-called affordability tests.
Specialist banks can fill this void but must triple how much they lend to stop people being shut out, according to a study by Together, a mortgage provider.
John Glen, of the Cranfield School of Management, who conducted the report in partnership with Together, warned that over the next eight years, half a million would-be buyers will be unable to get mortgages from major highstreet lenders.
Specialist banks currently lend £5bn a year and account for 2pc of all mortgages. However, the report said they need to double their market share to 4pc by 2030 to stop these buyers missing out.
Mr Glen said: “There are systemic issues with mainstream banks that bar many potential buyers who have non-standard criteria.”
Gerald Grimes, of Together, added: “The UK’s mainstream mortgage market just isn’t adapting fast enough to how we live.
“Every year, an increasingly large group of potential homeowners have to navigate a needlessly complex, intrusive, and time-consuming mortgage journey, with many facing outright rejection at the end of it.”
Mainstream lenders typically employ an automated approach which means less conventional applicants can miss out. However, more and more potential homebuyers have different circumstances. According to a survey by Opinuum for Together. Some 62pc of people who have applied for mortgages have one or more “non-standard” criteria.
More than a fifth of people who were rejected for a mortgage cited having non-standard income, which included having multiple incomes or being self-employed.
Buyers working part-time have to convince lenders that their hours are fixed and not variable, Mr Glen said. Those who are self-employed or working as contractors have to meet more strenuous criteria, such as providing evidence of upcoming contracts.
A further 21pc were rejected because they had a non-standard profile, which included being aged over 55, being divorced, or having impaired credit.
Mr Glen said any upcoming recession would fuel demand for specialist lending. The cost of living crisis has already meant lenders have become less likely to lend and have tightened their criteria. This has included increasing their estimations of household outgoings in line with rising energy prices.