New mortgage for self-employed at Kensington

1st July 2015

Kensington Mortgages has introduced a new policy for self-employed customers that takes into account a company director’s share of net profits in addition to his or her salary.

The mortgage is available to sole company directors and their partners. It is designed to reflect the true earnings of successful entrepreneurs who choose to keep some profit in their business rather than draw it all down as salary.

The move expands the options of the UK’s 4.5 million self-employed people in a market that has struggled due to restrictions on lending to borrowers who are not in full-time employment. Kensington’s own research reveals that 37% of self-employed borrowers struggle to prove their income compared with just 3% of employed customers.

By considering profit as well as salary, Kensington is able to base its affordability assessment on the salary taken by the customer and the company profit for the financial year.

Keith Street, head of Kensington, says: “This is a significant step in the way we approach lending to the self-employed and it is just one of the ways that Kensington is reacting to the shifting employment trends amongst our customers to ensure we are able to make responsible decisions without penalising those customers who do not fit a standard mould.“

Andrew Montlake, director at Coreco Mortgage Brokers, says: “It is refreshing to see lenders such as Kensington listening to the needs of self-employed clients, who have been somewhat underserved by lenders in recent years. Understanding the real issues self-employed borrowers face is important and this new policy is a real winner which should help a wide range of potential borrowers.”

David Hollingworth, associate director of communications at London & Country Mortgages, says: “Self-employed homeowners have been hit by tougher lending rules in recent years and can struggle to meet rigid income proof requirements. It’s therefore crucial that lenders continue to evolve their approach to provide more flexible solutions to self-employed borrowers.”

*2 year fixed with TSB 1.09% then 3.59% - APRC is 3.3% Max LTV is 60%. Quoted on 27th May 2020.