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Tough conditions for self-employed borrowers

Advisers say that the self-employed are bearing the brunt of tight lending conditions, with banks concerned about the long-term impact of Covid-19.

Wednesday, October 14th 2020, 4:31PM 1 Comment

Glen McLeod

According to advisers across the market, the self-employed are finding it more difficult to take out a home loan, with lenders placing deals under the microscope.

Advisers told TMM Online that banks are asking whether sole-traders have taken the government wage subsidy. They say banks are treating earnings projections differently, affecting clients' ability to borrow. 

Glen McLeod of Edge Mortgages said: "With regards to self-employed one of the banks is taking 70% of the 2019 financials as the maximum that they will attribute towards income for clients. It does make it extremely tricky when trying to put together an application."

He expressed frustration that direct deals were being treated differently. 

"I think the most annoying part of this whole situation is that it seems as if the client goes direct to the branch they get treated differently to how they would if we put our applications in."

iLender's Jeff Royle said the self-employed were being asked "questions around the Covid effect, and [banks are] requesting either P&L or management accounts with bank statements from April 1 to date".

Q Group's Geoff Bawden said the self-employed "have been particularly targeted because almost everyone has been affected by the impact of Covid".

He added: "In addition to providing past income detail we are having to provide evidence of what has happened since the advent of Covid, ie in this current financial year. The banks are seeking assurance that past performances can be sustained – very difficult to prove in this environment."

Bawden said people working in certain sectors were being put under the microscope.

"There are some obvious high risk industries that are also a target, for example travel and hospitality. In fact anyone who was seriously impacted by, particularly, the first lockdown."

He argued banks were going too far.

"There is a mindset amongst the most conservative that the client might not recover to previously recorded income levels. I personally think that is short sighted and it undervalues the resilience and capacity of most Kiwis."

Tags: Covid-19 home loans Lending mortgages self-employed lending

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Comments from our readers

On 15 October 2020 at 3:02 pm perryb said:
How true, self employed (regardless of all the fluffy advertising banks are doing) as usual are getting it hard. Not only that the assessments are taking up to twice as long as wage earners.

Just been told a loan will be reassessed on the 19th(monday) after originally sending to unit on the 21st sept.

4 weeks, I said to the lender it was really poor service for the client and not acceptable.

Brokers are powerless - and the groups silence gives me tinnitus

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - 2.25 - -
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 2.55 2.69 2.79
Median 4.55 2.93 2.99 2.80

Last updated: 21 October 2020 8:48am

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