Why now? The catalysts for change

The contracting market has changed beyond all recognition, these last few years. We’ve had to adapt and change with it to stay ahead of the game.

We now go beyond mortgages for the traditional limited company and umbrella payment structures. We can now arrange mortgages and protection policies for contract workers of every kind.

We’ve long been pioneers of contract based underwriting. The industry has even recognised our brokers as experts in their field. With our new website and fresh outlook, we’re broadening our scope.

It’s time to celebrate the professionalism of our staff. It’s time to shout about our status the leading mortgage broker in the market you’re welcome to join us on this exciting journey.

What’s new? Our inclusive client scope

Since 2004, our website focused on serving limited company and umbrella contractors. As such, we didn’t always address the needs of the wider flexible labour workforce.

Now, it’s time to be more inclusive. Through negotiations with lenders, we can help so many more independent professionals with their mortgage and protection needs:

• Construction Industry Scheme subcontractors
• Zero-hours contractors
• Locums and NHS contractors
• Agency staff
• and more…

We’ve partnered with KOTA, a leading design agency, to put our new ethos into effect. They’re helping us to make our bold statements in the contractor mortgage market:

1. Yes – Freelancer Financials is the biggest and best mortgage broker in this space.
2. And yes – we serve the whole of the flexible labour workforce.

While KOTA has redesigned our logos and the look and feel of the website, this isn’t just a facelift.

Our branding is a reflection of our commitment and intent:  we’re providing the flexible labour workforce with the information and tools they need to plan their financial lives

The ultimate contractor mortgage resource

Almost every page of our extensive site has been rewritten and updated. You’ll find:

• Information tailored to every type of contract worker, from limited company contractors to seafarers and yacht crew
• Comprehensive contractor mortgage lender guides, with the latest lending criteria to check your eligibility
• A huge range of exclusive tools and calculators, helping you find the best market rates from contractor-friendly lenders and many more
• Insider advice, tackling everything from your IR35 status to how buy-to-let mortgages work for contractors
• Direct access to our latest Google and Facebook reviews; see for yourself how our clients feel about us in their own words
• Detailed information on specialist mortgage types and our full range of protection insurance

Easy access on every device

Our competitors can make the information you need hard to access, often gating it behind contact forms.

In contrast, we have made everything available upfront, with no commitment at all. After all, we’re the market leaders for a reason. Our advice is 100% free, right up to the point we submit your mortgage application.

As you’d expect, you can access any of these features on any device. The new website is fully optimised for mobile throughout. So you check your remortgage options – or view our latest award video – on the go at anytime.

What hasn’t changed… and why

We began championing contractor mortgages in 2004. We’re still the leaders in the field, recognised throughout the industry.

We proud to be fully transparent with our clients, lenders and business partners alike. Every day, we dedicate ourselves to maintaining that reputation.

Our brokers are trained to give the highest levels of customer service. It’s baked into our ethos. As a result, our clients have given us more than 900 5-star reviews on Google and Facebook.

So, no: some things won’t change. But the focus of our site and our visual branding have changed, in our opinion, for the better.

Take a look around – give us your feedback on our new website, branding and focus.

We’d like to know what you like about it. But, more importantly, let us know what you don’t like.

Either way, get in touch. We look forward to hearing from you, and working with contractors of every kind for many years to come.

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In a grand ceremony at the Allianz Stadium at Twickenham, we witnessed something unprecedented. Our Head of Mortgage Sales, George Yerou, scooped the “Residential Broker of the Year” award. A great achievement on its own, but so much more…

Who (or what) is Next Intelligence?

Next Intelligence is a mortgage club of some 25 years’ standing. With experience garnered across the spectrum of mortgage lending, the club supports 6,000 UK intermediaries.

Members can leverage the club’s experience in a number of ways:

• helping place clients with complex circumstances with the right lender;
• ‘packaging’ applications so that underwriters get the best possible view of applicants’ circumstances;
• guidance and marketing advice to help grow their members’ businesses.

A little fish cresting in a big pond

Unlike us — specialists in a specific niche — many of Next Intelligence’s members are ‘vanilla’ brokerages. That means they’re generalised, and deal with applicants from all backgrounds.

Winning against such diverse and high quality members, it makes George’s coup even more spectacular. But, honestly? We’re not surprised.

George’s thirst for knowledge is unrivalled. This is evident in his broking skills, for which his clients give 5-star feedback time after time. And, whilst talking of 5-star performances, it would be remiss not to mention his admin, Louisa Anchant. Many of George’s Google reviews often cite Louisa as an integral part of our clients’ fantastic mortgage experiences.

George has had an amazing year ‘writing’ business, often against market trends. Plus, he’s led the Freelancer Financials‘ broking team, as well as preparing for his recent wedding. A stellar performance, indeed. We look forward to seeing George’s career (and marriage!) go from strength to strength!

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• the recent history of self-employed applicants;
• (scary!) predictions for projected self-employed mortgages over the next five years.

In isolation, the headlines for both the recent past and the near future leave the reader agog.

First, the research found that only 5% of self-employed applicants are successful.

The cited reasons are familiar to us, especially to our contractor borrowers. More about those reasons, shortly.

But, it’s the second headline, the prediction, that makes you take a step back.

According to Together’s research, there’ll be a 67% rise in self-employed mortgages in the next five years.

In pounds and pence, the research suggests self-employed lending will balloon from £20.9bn (2023) to £34.8bn (by 2029). That’s a tad more than inflation, eh? (Well, for now…)

Let’s take a look at what these predictions could mean.

A potential explosion of self-employed mortgage applicants

Twenty years ago, there were 3.2m self-employed people. Today, there are 4.3m, an increase of around one-third. So, why are we expecting the sudden ramp-up in that figure?

Well, in Q1 of 2024 alone, the self-employed ranks in the UK grew by 183,000. It’s no surprise; here’s why.

The societal melting pot

The business landscape is changing. Technological advancements are catapulting us into the future more rapidly than ever before. Companies need to adapt to and adopt those developments. But they don’t necessarily need full-time staff for that purpose.

Although not in their entirety, filling these gaps accounts for many IT contractor roles. But this space is expanding fast.

Visit any of your social networks and actually read the ‘sponsored’ posts (instead of skimming them). If your search/like history shows any hint of an interest in tech, you’ll get bombarded with AWS cloud architect training opportunities, or similar.

These are lucrative positions. More importantly, they’re self-employed roles. Many even hint they’ll have a job for you at the end of the 6-month training.

And that’s just one sector of self-employment.

Changing attitudes of the mom-and-pop store owner

It’s not just big business that’s changing. COVID taught us that we can make money from home by embracing our inherent talents. Lockdowns, in fact, almost forced us to fend for ourselves.

Now we’ve had a taste of it, it’s proving difficult for many to return to the rat race. This is playing out in our evolving work and lifestyle patterns as we return to normal.

It all means that more of us have ‘non-standard’ lifestyles and income. And, boy, do we know about that?!

Over the last two decades, we’ve seen how difficult it is to change traditional lenders’ attitudes. Trying to get them to move away from outdated, biased lending criteria has often been like pulling teeth.

The gig economy and flexible labour workforce are growing exponentially

Even more recently, we’ve learnt there simply aren’t enough workers in the construction industry to fulfil Labour’s home-building target.

This is one of the key measures by which the Labour government has invited us to judge them. To that end, we can expect a huge push to get apprentices or workers who’ve left the sector to join the Construction Industry Scheme.

CIS workers are another self-employed sector typically unsuccessful with mortgage lenders. Their increased ranks will only compound the research’s figures.

The research data covering recent self-employed applicants

A couple of the headlines from the research really stand out and back up what new clients who come to us tell us.

Of the ‘non-standard’ self-employed applicants who were rejected:

• 22% were rejected because they were self-employed;
• 10% were rejected because their income fluctuated.

But it’s the bottom line in Together’s research that’s genuinely horrifying:

“in the last year, only 5% of self-employed applicants have successfully secured the mortgage they were after.”

And what would happen if we took the current figures and extrapolated them by the predicted 67% rise by 2029?

It would leave hundreds of thousands of rejected and dejected entrepreneurs unable to buy the home their income deserves.

Specialist income needs a specialist to interpret it

We can’t let that happen. Well, we don’t. But it’s like we say so, so often:

‘non-standard’ income means you don’t conform to the outdated criteria lenders at the High Street level still peddle.

This is the difference: we convert 94% of our self-employed mortgage cases.

The majority of those limited company contractors and umbrella employees. But there are also ltd co. directors, freelancers, sole traders and CIS workers in that mix, too.

The only scenarios we can’t help with are:

• Sometimes, when clients are attempting to secure a mortgage on a non-standard construction property;
• When clients have severe bad credit, including CCJs, defaults and IVAs;
• With clients who have less than one year’s trading history (this doesn’t apply to contract workers);
• Or where clients are going for a property that their income just doesn’t warrant
  • (often, above 5 × their annualised contract income, depending on their unique situation).

You have a specialised income structure; you need a specialist mortgage broker

As a self-employed applicant, you’re a specialist borrower. You need a proven specialist broker to interpret your income to a senior or specialist underwriter for you.

Many of you will feel trapped by or familiar with the barriers we’ve outlined here from Together’s research. Let us show you why our mortgage completion success is so vastly different from the norm.

20/1 against you getting a mortgage the traditional way are long odds. If you want to reduce those odds in your favour, come talk to us before showing the bookie your stake.

The post Self-employed? Up your mortgage prospects from 5% to 94%! appeared first on Freelancer Financials.

“We are incredibly honoured to be recognised by the industry for our commitment to providing exceptional service and support to contractors,”

said John Yerou, founder and CEO of Freelancer Financials.

“This award stands testament to the expertise, hard work and dedication of our entire team, who are passionate about helping contractors achieve their homeownership dreams.”

Innovation and experience

Freelancer Financials has built a strong reputation for its innovative ways of navigating the complex world of contractor mortgages. The company’s team of experienced brokers works closely with contractor-friendly lenders to secure the best possible mortgage deals for their clients.

“We are grateful to our clients, partners, and the entire contractor community for their continued support,”

added John.

“We will use our independence to continue to strive for excellence. By eliminating the barriers many traditional lenders still needlessly impose, we will meet and surpass the evolving needs of contractors.”

Contracting Awards 2024

The Contracting Awards recognise the outstanding achievements of individuals and organisations in the UK’s professional contracting industry. This year’s event — held at the Hilton Hotel, Park Lane, London on November 13th, 2024 — was the biggest celebration yet of the sector’s growth and innovation.

About Freelancer Financials

Since 2004, Freelancer Financials has sought to bring fair mortgage lending criteria to the UK’s flexible workforce. Developing contract-based underwriting directly with lenders, the team has helped thousands of contractors buy the home their income and status deserve.

A trading style of Mortgage Quest Ltd, Freelancer Financials is regulated and authorised by the FCA.

John Yerou, CEO, Freelancer Financials
email: john@freelancerfinancials.co.uk or call: 0208 421 7999

The post We win ‘Best Contractor Mortgage Broker’… again! appeared first on Freelancer Financials.

In a way that spookily echoes what we’ve already done, he urged homeowners to leverage the opportunity now presented to those due to remortgage.

Our ‘rate monitoring service’ allows homeowners to lock in their next deal up to six months before their current deal is due to expire.

This service is ideal for contractors. It gives them visibility into what they need to be earning with their successive contract to maintain a healthy budget.

But it extends to the regular self-employed and PAYE employed, too.

Here’s more from that podcast, plus how you can leverage our ‘win-win!’ service to guarantee you’ll pay no more for your remortgage than the best rate that’s on the market today.

The biggest single takeaway from the podcast

Without copying the podcast verbatim, here’s the most crucial quote from the whole episode, IMHO:

“If you don’t know when your rate ends, go get your diary out right now, find out when it ends and put a marker 6 months before that says: ‘Mortgage time, start sorting it now’.”

We really couldn’t put it any more succinctly (or, conversely, directly) than that.

No longer the need to sit on the fence before striking a new deal

We know many of our clients have been holding out to remortgage. Many have even suffered their lender’s SVR while awaiting lower rates.

At last, signs have begun to move in a positive direction. Some lenders have broken the sub-4% bookmark (albeit for specific criteria, including sizeable equity/deposits). But average mortgage rates are yet to filter down to anything like that.

What doesn’t help is that many people are coming to remortgage off a substantially lower-rate deal than what’s available. It’s this causing the hesitancy we’ve seen for twelve months or more.

I shudder to think how much some people must have paid to their lenders that they needn’t have. But this herald from Martin Lewis should encourage homeowners to take action.

Even if you’re six months away from your deal expiring, begin the remortgage exercise now. With us, it’s a simple process that guarantees you’ll pay no more than the rate you lock in today.

Here’s how our rate-monitoring service works

It’s great to see the rest of the mortgage market catching up with Freelancer Financials’ mortgage rate monitor service. We implemented the service several months ago with one of our most prominent partners. Now, we’re rolling it out to the wider market.

If you’re interested in our rate-monitoring service, the first thing you need to do is request a callback from one of our experienced advisors. Select a time that suits you, and we’ll call you back during that window.

Based on that conversation, we’ll scour UK lenders to find a deal that best matches your circumstances. And, don’t worry: we’re 100% independent, so no lender is off-limits to us.

We’ll prepare your quotation and, if you’re happy, you lock in that rate once the lender has approved your application. After that’s when the magic happens.

The win-win remortgage proposition

When you lock in your rate, that’s the highest you’ll pay for your remortgage. If the rate goes up, no problem. You pay the rate on the day you give us the go-ahead.

But what if rates fall, as is looking ever more likely? Again, we’ve got you covered.

We’ll move you onto the lower rate automatically. So, it doesn’t matter how many times the rate drops between you locking in your rate and the remortgage taking effect, we’ll always move you to the lowest one available to you.

That’s a win-win if ever I heard one. To register interest in this service, visit our sign-up page.

p.s. – if you’re still not ready to commit, why not consider taking out an interim tracker mortgage? There are even trackers available with no early repayment charges. Check out Option 2: tracker mortgages, also on the rate monitor service page.

The post Can contractors lock in a remortgage six months in advance? appeared first on Freelancer Financials.

It was the second time we’d done so, having first won the award in 2020.

Last month, Contracting Awards announced their shortlist for this year’s Awards. And, happy days: we’ve made the final cut again!

We’ll find out whether we’ve retained our title at this year’s ceremony at Hilton Park Lane in November.

But, ahead of the event, I want to go behind the scenes.

What makes an award-winning contractor mortgage broker?

What do we do as an organisation that has seen us make every shortlist since this prestigious award began?

Five-star service across t’Interweb

Every year, we have to convince the Awards panel that we deserve to make it through to the final judging phase. At this point, you might throw that ancient adage back at us: ‘Self praise is no praise!’

And, you’d be right. It’s obvious we’re going to big up our service to the panel.

Luckily, we don’t need to rely solely on what we say about ourselves. Between Facebook and Google Reviews, we have almost 1,000 satisfied clients who’ve taken time out to rate our service as 5-star!

At time of writing, here are the latest three on Google:

Chris Sheppy, Sept 1, 2024

If there were more stars, I would rate Andrew Saunders even higher.

Throughout our mortgage application and renewal, he couldn’t do more for us, always looking for the best options in a very volatile and continuous[ly] changing environment, supporting us in our decisions and always having our best interest at heart.

He always answered all our questions quickly and explained option[s] very clearly, so that we could make the most informative decisions. We couldn’t recommend him enough- Thank you, Andy!

Laurence Berry, Aug 30, 2024

Excellent advice given which enabled me to get the best mortgage available.

Paulo Soares, Aug 14, 2024

We’ve used Freelancer Financials expertise to flawlessly secure a mortgage with the best rates.

Andrew Saunders took us by the hand and…expertly guided us through the whole process. Very engaged from the beginning, prompt and ready with the queries and patient with hiccups along the way but ultimately the journey was successful and we cannot recommend their services enough!

Contractors on contractor service providers

In addition to reviews out in the wild, the ContractorUK forum is similarly steeped in praise from our clients. Their feedback has made us the most recommended mortgage firm thereupon, testament to our exceptional service.

Going beyond mortgages and protection

The services we provide are only a small part of the contractor lifestyle. We know that our clients have to reach out to other professional service providers along the way.

To that end, we aim to give back to the contracting community through the Contracting Awards. So, once again, we’re sponsoring the Best Contractor Insurance Provider or Broker category.

We want to wish all finalists the best of luck, and can’t wait to see them at the ceremony in November:

• Tapoly;
• Kingsbridge Group;
• Hiscox;
• Markel UK;
• Qdos Contractor.

Our ethos sets us apart

When I created Freelancer Financials in 2004, I had one goal: to get lenders to treat the UK’s flexible workforce with the same impartiality they treat employed workers.

As far as ideas go, it was bold. And we’ve certainly nailed it, with more lenders offering contractor-friendly mortgages than ever before. But the process we’ve used, as well as the market itself, has changed over time.

I knew that, as long as we stuck to the goal, we’d win through in the end. And so it proved.

Raising the customer service bar has made us the go-to resource for contractors looking for mortgage advice and guidance. To this day, our cornerstone principles remain:

• Invest in long-term relationships: customers are for life;
• Always go the extra mile, especially when the going gets tough;
• Deliver clear, transparent communication throughout the application;
• Know your customer beyond their set of impersonal mortgage requirements;
• Respond to and update clients promptly, even if the news isn’t exactly what they want to hear.

We drive innovation (not it us)

The UK housing market is a fluid beast. Often driven by global factors, not just local or national events, we have to adapt and adopt, something at which we’re adept.

In recent years, we’ve seen our client base go from predominantly limited company contractors to umbrella employees today. We’ve helped lead this change within our lenders’ specialist underwriting teams.

Many of our clients have also foregone contracting altogether. Due to changes in IR35 (Off-Payroll rules in both the public and private sectors), they’ve returned to permanent PAYE employment.

To accommodate clients who’ve left the flexible workforce, we’ve relaunched our parent brand, Mortgage Quest. So, for any of our self-employed clients who think we can no longer help them, nothing could be further from the truth.

Mortgage Quest can now assist everyone, including ex-contractors who need to explain their work history to a mortgage lender.

Advances in tech and AI

We’ve also had to acknowledge changing technology, both from an internal perspective and for our website visitors’ usability. We’ve not shied away from either challenge.

This year we’ve introduced two new groundbreaking services for clients:

1. A “win-win” mortgage rate monitoring service:

Many homeowners looking to remortgage this year have faced a huge leap in interest rates. We’ve seen all manner of tactics to delay the inevitable, with clients:

• sitting it out on their lender’s SVR,
• taking out interim tracker mortgages, or
• extending their mortgage term to bring down their monthly repayments.

There had to be another way.

There was, and we found it: our mortgage rate monitoring service.

Our clients can now lock in deals up to six months before their fixed-rate period expires. If rates rise in that time, it doesn’t matter: you pay the initial rate they locked in when adopting the service.

If rates reduce during that period, even better. Our clients don’t have to do anything: we instantly move you onto any lower rate coming to market for your chosen mortgage deal.

2. The UK’s first contractor mortgage search engine

We didn’t sit on our laurels during the pandemic. We took that quiet time to invest in a whole new, fancy back-end support system.

It’s done many things for us internally. But it’s also helped us innovate outwardly to our clients direct.

Using our experience—and many of the broker team today have been with us from the outset—we created the UK’s first contractor mortgage search engine.

In essence, it’s like any other mortgage comparison tool. But we’ve eliminated any lender from the search who doesn’t have favourable contractor-friendly mortgage policies. We think it’s a game-changer, as any mortgage the tool matches to your criteria is guaranteed to be from a contractor-friendly lender.

You ain’t seen nothin’ yet

Those are the credentials we’ve submitted to the judges at this year’s Contracting Awards. All the services are ready to go, available today. And, fingers crossed, we hope they get us over the line.

Whether you’re a past client or new to us, give us a chance. See for yourself why we’ve won so many awards, both in specialist and general mortgage broker categories. Let us surprise you!

And, talking of surprises, don’t even start on what we’ve got going on behind the scenes for later this year. This is just the beginning!!

The post Freelancer Financials: Best Contractor Mortgage Provider/Broker finalist 2024 appeared first on Freelancer Financials.

But, following that, the ONS reported an uptick in inflation (from 2.0% to 2.2%), showing just how volatile and vulnerable the economy is.

Does this mean that lenders began reducing their mortgage interest rates prematurely?

From the evidence available to us: no, not really.

Whilst inflation is on an upward trajectory, swap rates are not. This may mean any further cuts to the BoE Base Rate are delayed.

But that doesn’t necessarily mean interest rates will mirror the Base Rate in its stasis.

Today, we look at why this goes against the grain.

More importantly, we consider short-term factors affecting mortgage interest rates and options for homeowners still holding out for better rates.

Why a small rise in interest rates may yet have serious implications

July’s uptick was the first time inflation had risen in six months. And, even though the market anticipated the rise (largely due to energy prices*), it rose more than expected.

0.2% may seem like a small increase. But it’s sparked a flutter of uncertainty about future Base Rate cuts.

Since 2020, the Bank of England had resolutely maintained its Base Rate of borrowing at 5.25%, predominantly to curb inflation. But it cut that rate in August, much to the relief of homeowners nationwide.

But, what do you know: inflation then went and bounced back up?!

Predictable, you ask? Maybe. And that’s why this latest inflation data might complicate the Bank’s future decisions.

*One factor in this month’s rise was the comparison to last year’s gas and electricity prices. Whilst food prices also contributed to the rise, there is a silver lining. Core services inflation fell more than expected, which may help mitigate the rise in headline inflation’s impact moving forward.

Impact of increased inflation on mortgage interest rates

The relationship between inflation and interest rates isn’t always direct or immediate. The BoE‘s Monetary Policy Committee will be aware of the rise in inflation’s connotations, especially in the short term. But that’s not all.

Wage growth and unemployment figures

Other economic factors, such as employment rates and wage growth, also influence the Bank of England’s decisions.

Despite ups and downs over the last twelve months, the latest quarterly figure, 4.2%, APR-JUN 2024, is the same as the same period in 2023. And wage growth, adjusted for inflation, stands at 5.7%.

Neither will imbue the Bank with the confidence it needs to make further cuts to the Base Rate.

Is the rise in inflation just a bump in the road or a longer-term problem?

The overall impact on mortgage rates often depends on the magnitude of any interest rate increases and the duration of the higher inflation period. We’re yet to see if the recent rise is a bump in the road, or whether we’ll quickly return to the target 2%.

For homeowners and potential buyers, it’s crucial you monitor economic developments closely. Then, when you’re ready, consider consulting with a mortgage advisor to assess the potential implications for your individual circumstances.

This breakdown of the potential effects can help us understand why:

Pressure on the Bank of England:

The central bank’s primary goal is to maintain inflation within a target range. The current target figure is 2.0%, which is where we were at before the recent rise.

Any rise in inflation might push the MPC to consider increasing interest rates to cool down the economy and curb price growth. The new Labour government will be aware of a rod they’re making for themselves if they don’t urge the BoE to keep inflation at or below target.

That may seem ironic, considering we were only recently in a (technical) recession. But the economy has been fighting inflation for months. Just as we began to see light at the end of the tunnel, the dampers came down again. Or, have they?

Potential rise in mortgage rates (emphasis on ‘potential’*):

If the Bank of England increases interest rates, mortgage lenders often follow suit. This normally leads to higher borrowing costs for homeowners and those looking to buy a property.

And, not too long in the distant past, average mortgage rates were well above the BoE Base Rate. But that’s changed.

Mortgage rates falling, despite the obstinate Base Rate and inflation

At the beginning of the year, the market expected up to a half-dozen cuts to the Base Rate during 2024. Due to sticky inflation, that hope had, in more recent months, dampened to 2-3 cuts this year. Even that now seems hopeful.

This recent rise in inflation may put any further cuts this year in jeopardy. But, given what we’ve seen this month, that might not mean mortgage interest rates will increase back to where they were.

Why mortgage rates are still falling (but might not for much longer):

Usually, the immediate impact of inflation on fixed-rate mortgages might be limited. But, we’ve reached the end of August and mortgage interest rates are continuing to fall. It’s as if the rule book has been burnt, trampled on and its ashes only then scattered out the window.

Still, it’s good news for homeowners.

Many households are still feeling the impacts of the cost of living crisis; after so much economic upheaval, homeowners want to feel reassured. And an increase in buyer activity since the Bank cut the Base Rate suggests that the housing market may indeed have turned a corner.

But, like everything about the market, little’s as it seems at face value. Zoopla contests that the lack of activity last year when interest rates were >6% has also contributed to the increase in market activity.

Lenders working on ultrathin margins

Average two and five-year fixed rates have continued to fall, driven by two factors:

• falling swap rates;
• intense competition between lenders.

And the reason we’ve seen mortgage interest rates fall below the BoE Base Rate is that lenders have been basing those lower rates on swap rates. Swap rates—forecasts for what money may be priced at in the future—have been falling steadily.

Even with falling interest rates, homeowners were still holding out for a better deal. That meant the market was sluggish before the Base Rate cut. That’s despite mortgage lenders having worked on ultrathin margins for weeks, if not months. They won’t work on such small gains indefinitely.

What would a raise in the Base Rate do to mortgage interest rates?

The Base Rate cut and falling interest rates combined have at least piqued homeowners’ interest as August has rolled on. But, given the margins and reductions we’ve already witnessed, lenders and the BoE alike may decide it’s time to put the brakes on further cuts.

If the BoE similarly holds the Base Rate next month—or, worse, puts it back up to 5.25%—it could have dire consequences for mortgage interest rates. That means homeowners holding out for better rates before remortgaging may miss this particular boat.

If you’re still not comfortable remortgaging right away, talk to our team about an interim tracker mortgage. You will have options; now’s the time to discuss them with a professional.

The last thing we want is for you to endure a lender’s SVR. At around 8%, they’re so punitive.

Compare the total costs of taking out a short-term tracker against staying on that SVR. You might be surprised how much you can save, even if you pay a fee for the privilege. You deserve better than 8%, surely?!

The post Why are mortgage rates so much lower than the BoE Base Rate? appeared first on Freelancer Financials.

I know. We’d forgive you for thinking: “You would say, that, wouldn’t you?”

But we say it for good reason. That’s because we urge caution when approaching High Street banks for a mortgage as a contractor.

Based on over two decades of award-winning experience, we can confirm with certainty three things:

• untrained advisors in-branch and through call centres won’t be able to see your real mortgage affordability;
• multiple failed applications and credit searches will leave a footprint on your history;
  • Hint: this is not good, especially if your credit score is already borderline;
• most High Street lenders do not ‘get’ contracting at branch or call centre level;
  • at best, they’ll offer you a self-employed mortgage, which is not the same as a contractor mortgage.

Why do mortgage lenders favour PAYE employees?

Contractors who apply direct to a High Street lender are fashioning a rod for their own back. I’m not trying to be dramatic. It’s the simple truth based on the bitter experiences of many of our clients.

For one, rejection will have a negative impact on your credit score.

Two, the same could also jeopardise your chance of owning the home you’ve set your heart on.

As a contractor, the deck is already stacked against you.

Why? Because most lenders build their affordability calculations around people in full-time, permanent employment.

A ‘permie’ can almost guarantee regular income. Even in times of ill health, most employers pay generous sick leave.

It’s also improbable that permies will lose their job. The two possible exceptions would be retirement or redundancy. Even then, both of these terminations usually assure a lump sum to help protect the bank’s investment.

In addition, a set amount of disposable income suits a mortgage lender’s affordability equation to a tee. The culmination of all these factors adds up to low risk, allowing neat little boxes to be ticked, meaning fewer hidden surprises.

How global economic meltdown affected lenders’ risk criteria

The effects of the credit crunch continue to impact our lives today. Yes, austerity measures brought in to steady the UK economy have become commonplace. Unbeknown to the majority, the UK’s mortgage industry also went through a renaissance.

The electorate, the Government and even the EU demanded heads on platters. Banks were the culprit in the eyes of the masses, and thus became the public scapegoat.

The FSA (as was) was in the spotlight and, if it was being kicked from pillar to post, it wasn’t going to take the whole rap. Enter, player one: the Mortgage Market Review.

The MMR looked to plug any holes responsible for the banking industry’s flagship product sinking. It found these holes, one of the biggest to affect the self-employed being the ‘self-cert’ mortgage.

Butts that once sat at the captain’s table ended up below deck plugging leaks. Not pleasant imagery, but true, nonetheless.

Responsible Lending: don’t shoot the messenger

Enter player two. Sat at the captain’s right hand to replace those vacated seats we now see Responsible Lending. These were a set of new guidelines guaranteed to shore up the mortgage ship. The legislature would ensure that only those who could afford mortgages on paper got them.

The problem is, many lenders have taken these Responsible Lending guidelines to the extreme. The degree to which some lenders are implementing them has even surprised the FCA.

As recently as the 21st May [2014], FCA mortgages and mutual sector manager Lynda Blackwell asked:

“We look at some of the questions being asked [by mortgage providers] and wonder why?”

She raised that concern at the Financial Services Expo in Manchester a little over a fortnight ago.

Yet the majority of High Street mortgage lenders are standing their ground. Their mantra remains “the lower the risk the better”. To them (and you), this means anyone not in full-time employment or without years of accounts is too high risk to countenance.

How will applying direct jeopardise my chances?

The risk you run as a contractor is leaving many footprints on your credit file without securing a mortgage. We’re not saying there are no contractor-friendly mortgage lenders on the High Street. There are.

But even then, advisers at branch level may not have the training to understand how contractors operate.

You are a specialist borrower; you need specialist mortgage advice

In addition, by applying through a branch direct, you’re not dealing with an underwriter. The risk here is that the adviser won’t present your application to the underwriter in a way that showcases what you can afford.

It’s import to understand that your payment structure falls outside the norm. That means it will be a specialist underwriter who appraises your mortgage application. They’ll be the one to approve it, or reject it if the information passed on to them is not presented ‘just so’.

You’ve worked so hard to get where you are today. Don’t jeopardise the mortgage your earnings deserve because the middleman doesn’t ‘get’ the way you work.

It’s natural to think that an adviser in branch knows best; we know from experience that’s just not so. You have a current contract, one that your expertise has earned. Talk to an advisor familiar with contract-based underwriting before applying for a mortgage to make it count.

The post How do I find a contractor-friendly mortgage lender? appeared first on Freelancer Financials.

…We were working on ways to solve UK contractors’ problems of getting mortgages on the High Street. In doing so, we realised that immigrant workers had a similar problem, only twofold:

• lenders didn’t know how to deal with them as a contractor;
• advisors showed similar ignorance when dealing with them as a non-UK citizen.

The logic we applied to typical contractors’ problems we applied to those of an immigrant.

It meant abandoning trying to reason with in-branch and call centre staff.

That’s because they’re restricted to their own set lending models. Nine times out of ten, they tailor those algorithms to permanent, salaried employees.

We know the limits of their inflexible systems. In our experience, mortgages for immigrants fall outside their boundaries.

No matter. We’ve faced this problem many times working with independent professionals. Now, we only go to people with the power to make decisions: the underwriters.

Problem-solving for specialist mortgages: it’s what we do

And guess what? Our philosophy works! We can get immigrants mortgages just as we do for limited company contractors.

Our process is simple. We’ve identified and established working relationships with foreigner-friendly mortgage lenders. We then apply their criteria to your situation. No messing about; we work with these lenders daily.

The result is this. We can now arrange mortgages for non-EEA foreigners working in the UK on Tier 1 and 2 VISAs.

Since resolving the issues, we’ve helped many foreign nationals buy their first UK property. Country of origin is far less important than you think. It’s the way you operate your business and your payment structure that’s key here.

So if you’re in the UK on an HSMP or Tier 1 or 2 VISA, we can often help.

What problems do immigrants face at High Street mortgage lenders?

Many of our ‘immigrant-friendly’ lenders are recognisable High Street names. Needless to say, this can and does confuse our foreign clients.

How can we help when the client has failed going to a lender direct?

The reason’s simple. Your local branch often struggles to take your payment structure into account. They want security. They want longevity.

If you have less than 12 months remaining on your contract (who doesn’t?), they will penalise you.

Understanding the traditional UK mortgage model

Most lenders also use simplistic methods to work out relevant earnings for lending purposes. In mortgage terms, how they calculate your ‘affordability’ is basic in the extreme.

In reality, it caters for those in full-time employment, not contractors.

Recent times of austerity have exaggerated this scenario. Some lenders still implement Responsible Lending Guidelines to the letter, too.

It’s tough, but we know why they do it. This means you can earn more than an employee doing the same job, but you’re less likely to get a mortgage.

That’s because your net income will show low take-home pay. Your accountant makes sure it does to maximise tax reliefs available to you.

But an in-branch advisor won’t understand that.

Their lending model uses net take-home as the basis of their affordability calculations. They’re just not trained to deal with dividends and low salary.

Presented with your ‘facts’, lenders will demand at least two or three years’ accounts.

When you’ve been in the UK for only a short while, such documentation is impossible for you to produce. As such, your application is ‘rejected’ or marked ‘high risk’ before it’s had a fair hearing.

Why specialist mortgage brokers are different to the High Street

Unlike banks or building societies, a specialist mortgage broker is just that: a specialist. Rather than try to secure mortgages for everyone, they focus on specific market sectors.

In our case, we’ve built relationships with contractor-, self-employed- and immigrant-friendly lenders. That means we know what we need from you and know which lender best suits your circumstances.

Make no mistake: finding a suitable lender is not only a matter of saving time.

Imagine you visit every lender on the High Street and they all run a credit search. Each time you fail, you’ll leave a ‘footprint’ on your credit file.

The more you search and fail, the worse it becomes. But most contractors don’t know this until it’s too late.

This is less of a problem if you have a long and established credit history. But most foreign nationals, by virtue of their circumstances, do not.

Failed searches can have a grave impact on your ability to secure any type of finance in the future. But of far more importance is the actual matching of you with your perfect lender.

And that’s where your greatest benefit lies: in a broker who knows how to get a mortgage for immigrants in the UK.

Use a broker who knows the market and the market knows them

Every day, we speak to lenders who have a direct impact on our business. We are aware of their mortgage products, interest rates, deposits and fees.

Building relationships like this has put us and you in a strong position. They allow us to offer you an immigrant mortgage using a generous multiple of your daily rate.

We’re an independent mortgage broker, not tied to any one bank or building society. We know all the lenders in the UK who offer genuine contractor mortgages. In many instances, we’ve been integral in the lender opening their doors to contractors.

This gives us access to the whole of market, so rates available to us can fluctuate from lender to lender. We even have exclusive deals you won’t find elsewhere, so strong are our relationships.

We invite you to leverage that strength. It even enables us to get a mortgage for new immigrants, as well as those more established.

Benefits of using a specialist and common pitfalls to look out for

Our team of specialist advisors has secured special terms for foreign nationals. That means they can get mortgages for contractors on an immigrant visa. That’s foreign nationals here as an HSMP contractor and those on Tier 1/2 visas.

These terms give immigrants access to mortgages with lower deposits, as little as 10%. Plus, it uses your contract rate to determine affordability, not accounts.

And these bespoke lending criteria get even better!

As there’s so little documentation, the whole process is much quicker than on the High Street. During the pandemic, mortgage completion times have gone out slightly. But, in usual circumstances, we often secure mortgages within days of an applicant’s first contract.

A proven track record is essential for securing mortgage finance

It’s our policy to only work with High Street lenders with proven results. This means that they’re dependable and trustworthy enough to process mortgages that actually complete.

Why is this so important to mention?

There’s a large number of mortgage lenders falling over themselves to lend you money. Or so they say!

It’s all too easy to go online or into a bank branch and secure an “Agreement in Principle”. This is not the same as a mortgage offer. So, please: beware.

An Agreement in Principle isn’t a mortgage offer

Many lenders will offer you an A.I.P. within hours. But when your application goes to the underwriter for approval, they’ll often reject it.

The lender will then have to backtrack; the advisor will have to call you with the bad news. They’ll say they’re no longer comfortable with either your HSMP or contractor status. Or both!

We know this to be true as we’ve dealt with many immigrant contractors in just this situation.

If you reach this stage, your house purchase will be in real jeopardy. It could even leave you out of pocket. If you’ve arranged the searches needed to complete the mortgage paper trail, you may not get a refund.

How much can I borrow based on my contract rate?

Now you know that you can get a mortgage, you want to know how much you can borrow. As a guide to what you can borrow using your contract rate, you can visit our mortgage calculator.

There’s no need to talk to anyone immediately, if that’s what you’d prefer. If you’d like us to call you at a more convenient time, fill in our ‘Request a Callback’ form.

But you may be closer to buying a home than that. What if you’ve seen a house and what to put an offer in?

Well, let’s get you in there! We’re more than happy to give you a specific quote.

Your mortgage enquiry in total confidence, in expert hands

You can talk to us in 100% confidence about your needs and circumstances. We cannot issue an agreement in principle without talking to you first.

When you call, our experienced advisors can match you to a lender and a mortgage. That’s before they run any unnecessary credit checks that could leave those nasty footprints.

Once we gather the relevant information, we’ll email you our recommendations. We can then discuss your options in more detail.

If you then want to proceed, awesome. We’ll assign you a personal, dedicated advisor from within our office.

They’re trained to handle the immigrant contractor mortgage process with diligence and within guidelines. They’ll look after you from application right through to completion.

This ensures that your mortgage completes without incident and on time. You’ll struggle to find a guarantee like that on the High Street, no matter what your nationality!

The post Can foreign nationals get contractor mortgages in the UK? appeared first on Freelancer Financials.

Here, I’ll outline the most tax-efficient salary and dividend levels split for the 2024/2025 tax year (6 April ’24-thru-5 April ’25).

First, I’ll tackle the tax bands where income is drawn as salary.

Then, we’ll look at dividend thresholds and the optimal split between the two.

Finally, we’ll look at scenarios and strategies that optimise the various tax breaks on offer to limited company and PSC owners.

Moreover, how you can extract money from your company without paying through the nose for the privilege.

Income tax: salary

For 2024/25, the personal allowance remains the same as last year: £12,570. So, the first £12,570 you earn this year is tax-free.

If your salary is your only company director income, then any additional salary above £12,570 will incur tax at 20%.

Once your earnings breach the Higher tax band (£50,271), your salary up to the Additional rate will be taxed at 40%.

For any income you earn above £125,140, the Additional rate, for the 2024/25 tax year, you’ll pay tax at 45%.

There are other thresholds and tax issues of which I need to make you aware. But, for this illustration, I’ll try to keep it purposely simple.

Tax dividends, tax year 2024/25

The dividend allowance means that an individual’s first £500 of dividends is tax-free, £500 less than last year. Over and above £500, the dividend income is taxed as follows:

Unused personal allowance

Any unused personal allowance—£12,570 for 2024-25—is tax-free. To see how that stacks up against other income, let’s look at a simple example.

Imagine your only income was dividend income. £13,070 of this would be tax-free dividend income in 2024-25. This incorporates both your £12,570 personal allowance and the £500 annual dividend allowance.

Dividend tax thresholds

The basic rate tax band for 2024/25 is £12,571-to-£50,270. Any dividend (above unused Personal Allowance) falling in the basic rate tax band (from the £500 free allowance up to £50,270) is taxed at 8.75%

The Higher rate tax band for 2024/25 is £50,271-to-£125,140. Dividend falling in this band will incur charges of 33.75%

Additional rate dividends (above the Higher tax band of £125,140) will be taxed at 39.35%.

The marginal rates of tax can be even higher if you trigger other tipping points. These could be child benefit charges at £60k or the £100k personal allowance clawback threshold.

Optimal salary for one- and two-person payrolls

HMRC has withdrawn the employment allowance for one-person payrolls. This means one-person payroll’s optimal salary is £9,096 per annum (£758 per month).

Where two or more people are on the payroll, e.g. husband and wife, their optimal salary is £12,570 per annum.

The optimal tax position, i.e. drawing dividends that take you up to but not exceeding the higher rate tax threshold, has changed little.

Where the taxpayer/contractor or their spouse receives other income, the optimal dividend should be reduced so that the aggregate income does not exceed the higher rate tax threshold of £50,270.

Optimal salary dividend split for contractors, 2024/25

The optimal position for the tax year 2024/25 is, therefore, as follows:

Strategies for achieving the optimal balance

Many contractors choose to limit dividend income to avoid paying tax at the higher band (>£50,270 for 2024/25).

Whilst restricting salary and dividends is the optimal tax strategy, it’s not always possible.

How much you draw is a personal choice; striking a balance is key to a fulfilled lifestyle.

Consider your preference for tax efficiency versus the retained profits in your business.

Yes, you want to operate as tax-smart as possible. But don’t live so frugally that you’re skrimping to cover your day-to-day living expenses.

By the very fact that you’re a limited company contractor, your earnings are such that your retained profits should exceed the above drawings level.

The main challenge that arises, then, is how to eventually—and efficiently—extract the retained profits from your company. Here are the main options to that end:

Spousal dividend distribution

Ensure dividend is distributed between spouses to fully utilise each spouse’s personal allowances and basic rate tax band.

For a contractor whose spouse/civil partner receives little or no income, the problem is less acute. That’s because each shareholder can draw up to £50,270, giving a total net drawing of £100,540 per annum.

If the contractor or their spouse/civil partner receives other income, reduce the optimal salary and dividend accordingly. Ensure that the aggregate income per taxpayer does not exceed £50,270; or, if higher drawings are necessary, avoid the various tipping points.

Closing the limited company

This option is most appropriate for contractors considering either retiring or returning to permanent employment.

Where possible, restrict drawings to the optimal salary and dividend level until the company can be closed. Thereupon, the retained profit can be distributed at 10% via Business Asset Disposal Relief (previously known as Entrepreneur Relief [up to 6 April 2020]).

If the net asset value to be distributed on closure is more than £25k, you’ll need to close the company using members’ voluntary liquidation. Only then will the capital distribution qualify for the 10% Business Asset Disposal Relief tax rate.

In essence, you retain excess profits in the company to shelter them from personal tax until you can extract them tax efficiently upon closure of the company.

Targeted anti-avoidance rule (TAAR)

Do take care not to fall within the new anti-phoenixing targeted anti-avoidance rule (TAAR).

This rule claws back the benefit of Business Asset Disposal Relief relief. It triggers if the individual receiving the distribution continues in, or is involved with, the same or similar trade to that of the wound-up company.

The catchment period is any time within two years from the distribution date.

n.b. The anti-avoidance will only apply if it is reasonable to assume that the main purpose, or one of the main purposes, of the winding up is the avoidance or reduction of a charge to Income Tax.

Property investment

A common reason contractors extract retained profit from their PSC (personal service company) is to invest in property.

In particular, many contractors top up their income/pension pot with residential buy-to-let portfolios.

One option is to buy property investment through the company, thereby avoiding the need to extract the funds from the company.

Several lenders specialise in lending to limited companies to fund buy-to-let property investments.

True, the number of mortgage products is fewer than are available for personal ownership. But, sufficient lenders offer them to ensure competitive interest rates.

Property ownership through a limited company also gets around some of the recent negative changes to the taxation of rental income. In particular, from 6 April 2017, the government began restricting interest relief on rental properties for higher-rate taxpayers.

Pension contributions

Contractors can choose to fund their pension through their limited company. That’s because employers can contribute up to £60k annually to their employees’ personal pension scheme.

Furthermore, any unused pension allowance can be carried forward for up to three years. This allows a maximum potential single contribution of up to £240k (where the allowance was unused in the previous years).

Annual pension allowances are subject to certain restrictions, such as the “tapered annual allowance” and “lifetime allowance” rules. Unless you know them backwards, you should seek professional advice before making any pension contributions.

SIPPS/SSAS pension investments

Pensions have become more robust, powerful and flexible tools for investing in commercial property.

A SIPP gives you the flexibility to save and invest in anticipation of your retirement. Similar to a standard pension, it puts you in the driving seat of where and how you want to invest.

SSAS pensions allow a limited company to borrow from its own pension fund, up to a limit of 50% LTV at any time.

The SIPP’s “defined contribution” would, in this instance, be the property investment, which is then administered through the company for the benefit of its directors and employees (where applicable).

Relaxation of the pension rules

You are no longer forced to buy an annuity. There’s no longer a restriction on the amount of your pension fund that can be withdrawn as a lump sum after age 55.

As such, funding a pension has become a more attractive prospect for many contractors.

You can, as a rule of thumb, treat employer pension contributions as tax-deductible company expenses. This directly reduces the company’s corporation tax liability. Plus, the contributions themselves aren’t treated as taxable income or drawings.

Director’s loan and Section 455

Not all contractors are moved to invest in a pension or property. Others can’t restrict their drawings to the optimal salary level. In these instances, they could consider using directors’ loans as alternatives to paying dividend.

Here’s the scenario

If money drawn from the company exceeds the director’s optimal dividend and net salary, they can treat the excess as a loan from the company.

If the loan isn’t repaid within nine months of the company’s accounting year-end date, the company must pay a corporation tax deposit at 33.75% of the overdrawn loan balance. This then falls under the Section 455 tax assessment.

The amount is equivalent to the tax that would have been payable if the director had taken the excess amount as a dividend. However, the advantage of paying tax under Section 455 compared with higher-rate income tax on a dividend is that it’s repayable when and if the director’s loan account is repaid.

One way a director’s loan account can be repaid is via a contra account. The account balance is offset against the capital distribution payable to a director upon the closure of the company through members’ voluntary liquidation.

How contra offset works

When a company is eventually closed by members’ voluntary liquidation, the shareholders are entitled to receive the retained profits as a capital distribution. That capital distribution can be offset against the amount the director owes the company as reflected by the director’s loan account.

This then triggers a repayment of the Section 455 tax deposit.

The shareholders will still have to pay tax on the capital distribution. However, assuming Business Asset Disposal Relief can be claimed, the rate of tax payable is only 10%.

Accordingly, using directors’ loans allows a 33.75% liability to be reduced to just 10%, thereby saving 23.75%.

The advantage of using Section 455

The advantage, then, of Section 455 tax over dividend tax is that Section 455 tax is potentially refundable. Under the right circumstances, you can claim the tax back upon closure of the company.

HMRC announced that it may yet introduce measures to tackle moneyboxing if it perceives this to be a problem. The risk that HMRC would view contractors using directors’ loan accounts in this way could increase the longer closure is deferred.

Nevertheless, HMRC has historically been content to assess directors’ loans as tax under Section 455.

Adult shareholders and Anti-Avoidance Rules

You could consider having more adult shareholders in the company. This would provide a tax advantage where the dividend is distributed to basic-rate taxpayers. That’s because they only have to pay tax at 8.75% on dividend income.

However, there are risks to this strategy. HMRC can use settlement legislation to attack situations where dividend is distributed to a non-spouse simply to avoid paying higher-rate tax.

This is particularly the case where:

• the dividend is circulated back to the contractor/taxpayer,
• it’s used to settle the contractor’s/taxpayer’s personal liabilities, or
• the taxpayer receives an economic benefit from the dividend paid to a non-spouse shareholder.

To protect against anti-avoidance rules, it helps if the shareholder has an active role in the company. Or if you can show they provided value to the company, e.g. they paid market value for their shares.

Given capital gains tax rules, it’s more practical and tax efficient to demonstrate this if third-party shareholders invest capital in the company by subscribing for shares on the startup of your new company.

Reach out to a specialist contractor accountant

Whilst the advice is thorough and actionable if you’re confident in your own abilities, it will still seem like a maze to some. You’re not alone. Even I’ve had to run many of the facts, strategies and advice above through a specialist contractor accountant.

The main takeaway is the optimal 2024/25 salary v dividend split for limited company contractors. If that’s all you glean from this article and want to leave the rest to your accountant, I get it.

You work too hard to risk inviting the wrath of HMRC through a taxation oversight. So, if there’s any element you think applies to you but you’re unsure, reach out. With the taxman, it’s always better to be safe than sorry.

Thank you.

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