The Intermediary – June 2025 - Flipbook - Page 20
RESIDENTIAL
Opinion
An unsung
hero for the
self-employed
F
or the UK’s selfemployed, the path
to homeownership
is oen less about
affordability and more
about acceptability.
Despite healthy incomes, many
entrepreneurs, freelancers, and
limited company directors encounter
roadblocks when applying for
mortgages – not because they can’t
afford the loan, but because the system
isn’t built for how they earn.
Break with tradition
Traditional lending models still favour
salaried applicants with consistent
income and long-term employment
history. But for the self-employed
– whose earnings may be seasonal,
contract-based, or recently increased
– mortgage assessments can oen
feel like trying to fit a round peg into
a square hole. It’s a structural issue
in the market, and one that urgently
needs rethinking.
A growing number of borrowers
in this space could benefit from more
nuanced solutions, and that’s where
Part and Part mortgages can come into
the equation.
Unlike the more common
repayment or interest-only models,
a Part and Part mortgage allows a
portion of the loan to be repaid on
an interest-only basis, with the
remainder paid down through capital
and interest. The result is lower
monthly repayments compared to full
repayment loans, while still enabling
borrowers to build equity over time.
Practical applications
This structure proved invaluable
in a recent case involving a limited
company director in the printing
industry. Looking to purchase a
£449,950 property with a 5% deposit
20
The Intermediary | June 2025
in the North East of England, the
borrower needed over £427,000 in
finance. Their latest accounts showed
strong profits of £68,000, a significant
rise from £35,000 the year before,
following the award of several new
business contracts. But despite clear
affordability, the combination of
limited trading history and high loanto-value (LTV) would have excluded
them from many mainstream
lending options.
With lending criteria that allowed
for the use of the latest year’s accounts
and income multiples of up to
5.5-times at 95% LTV, the case was
assessed favourably. The solution was
a Part and Part mortgage split between
£249,950 on an interest-only basis and
£177,502 on repayment, structured
over a 30-year term.
Crucially, the loan structure
ensured that the borrower would
retain at least £200,000 in equity
by the end of the term, meeting
minimum regional equity thresholds
and offering future flexibility,
including the option to downsize.
ASHLEY PEARSON
is head of intermediaries at
Loughborough Building Society
Traditional lending
models still favour
salaried applicants with
consistent income and
long-term employment
history. But for the selfemployed [...] mortgage
assessments can often feel
like trying to fit a round
peg into a square hole”
Intelligent design
This case is a prime example of how
criteria should be designed to support
real people with real borrowing
scenarios, many of whom are
can be overlooked by mainstream
lending channels.
For borrowers like this, whose
income is real and reliable but doesn’t
align neatly with rigid underwriting
templates, a Part and Part mortgage
can be a lifeline. It offers a balance
between immediate affordability and
long-term security, especially where
income is expected to rise, or where
future asset sales or pension access
are anticipated.
More broadly, this case reflects a
key lesson: modern borrowers need
modern mortgage options. Selfemployment is no longer a niche, it
accounts for around 13% of the UK
workforce, yet mortgage innovation
has been slow to catch up. Criteria that
consider recent earnings rather than
multi-year averages, and products that
offer flexibility without unnecessary
risk, are increasingly essential.
Part and Part mortgages won’t
be right for everyone, but in an
era where financial lives are more
fluid than ever, they offer a muchneeded alternative. For the selfemployed in particular, they might
just be the unsung hero of the
mortgage market. ●
