Why are two in three self-employed borrowers failing to secure a home loan?

RedZed’s Executive General Manager, Distribution, Chris Calvert, said the figures are compelling and point to the ongoing challenge self-employed borrowers experience when trying to purchase a home.

“The fact that two-thirds of brokers were unable to secure a home loan for a self-employed borrower suggests that those customers had a poor experience,” he said.

RedZed has always tailored its lending to the self-employed sector. In fact, over 97 per cent of its lending is to self-employed borrowers.

Turnaround times

The Momentum Intelligence research found that almost a quarter (23 per cent) of brokers who were unable to secure a mortgage for their self-employed customers said the main reason was because turnaround times were too long.

As a self-employed specialist, RedZed targets an ‘Approval in Principle’ time of 48 hours.

“Of course, there are certain situations when loans may take more time to process, based on the individual’s application, but we always strive to turn each loan around within two days,” Mr Calvert said.

“We continually invest in our people, the right infrastructure and the right origination systems to meet that target.”

Lender policies

Interestingly, one in five (20 per cent) brokers who were unable to secure a mortgage for a self-employed borrower said the major bank’s policy did not suit their scenario.

Mr Calvert believes this is a clear indication that brokers need to consider alternative lenders for their self-employed customers.

“Brokers are often driven to find the sharpest rate,” Mr Calvert said. “Understandably, the borrower will be pushing the broker to find them the cheapest rate. If they have seen low rates advertised, they would naturally assume that they would be able to get the same deal as a PAYG customer,” he said.

However, while the banks can offer aggressively low rates, they may struggle to cater to customers that are self-employed. The major lenders are set up to produce high volumes of loans to PAYG borrowers. Because of this, they can be challenged to cater to more specific borrowers.

By contrast, RedZed is set up to cater to self-employed borrowers, which means accepting and evaluating a different set of data from the customer.

“We don’t ask for two recent pay slips like the main banks do,” Mr Calvert said. “Instead, we can ask for accountants’ declarations, bank and BAS statements to assess the customers financial capacity and ability to service their loan.

“Any broker looking to provide a great experience for their self-employed customers should consider how a specialist lender like RedZed can help.”

RedZed backs self-employed Australians, providing residential and commercial loans to those who might be overlooked by...

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Written by RedZed

Last Updated: 16 March 2022

Published: 25 August 2021