Thousands of freelancers with contractor mortgages have suffered over the last 2 years as the mortgage market has declined.
The lack of new mortgage products has forced many contractors to stay on their mortgage lending company’s Standard Variable Rate once their original fix or discount expired, instead of getting a more competitive deal on a remortgage with another lender.
However, this situation may be about to change as lenders are once again beginning to compete for customers. Quite a few mortgage companies have released new products at their lowest rates since the start of the recession. A lot of these could be of interest to a financially shrewd contractor wanting to move from an SVR mortgage.
On average, a contractor will pay an interest rate of 4% on a Standard Variable Rate mortgage, but by shopping around freelancers could now pick up a fixed or variable rate at under 3%.
If something sounds too good to be true, it often is! The fly in the cheap rate ointment comes in the form of the FSA’s stricter lending guidelines that require financial institutions to confirm the income of mortgage applicants. Many of the big lenders have said this is simply too difficult to do in the case of self-employed people and so they will not consider lending to them.
The good news is that there are specialist mortgage advisers out there who will make a competitive deal available based on a multiple of contract pay. Hopefully this is not just going to be a temporary option and contractors will continue to have access to the same preferential rates that apply to salaried workers.
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