"Historically it has always been taken as read that lenders have an inbuilt prejudice against freelancers and the self employed but in recent years thousands of contractors will have benefited from the ability to self-certify income when applying for a mortgage.

"These self-cert schemes offer the chance to apply for funding without the normal proof of income and have been of great help to contractors who may otherwise, for a variety of reasons, have struggled to meet rigid earnings criteria.

"There are now fears that, as we approach the 1st November deadline for the Financial Services Authority to take over responsibility for mortgages regulation, the current flexibility could become a thing of the past.

"An early warning shot from the Canary Wharf headquarters of the FSA has concerned the need for lenders to be able to prove responsible lending and this is expected to lead to a tightening of the underwriting rules that banks and building societies use when assessing the affordability of a mortgage.

"In recent months lenders such as RBS and NatWest have pulled out of the self cert market altogether whilst others have followed Abbey National, Birmingham Midshires and the Britannia in restricting access to this type of borrowing.

"The irony of the FSAs approach to this subject and the lenders response, is that there have been exhaustive studies into the self-cert phenomena following a well publicised BBC Money Programme investigation and all have satisfied themselves that there is no widespread abuse of these products.

"On the contrary, because the target market for these mortgages will be relatively astute entrepreneurs and hard working small businessmen and women it has been proven that Self Cert borrowers are no more likely to suffer from mortgage payment problems than permanent employees and in some cases lenders report that they have a far better record with these schemes.

"It looks as if an age old friend of the contractor could well be about to disappear in its current form and the past couple of months have seen borrowers engage in a 'buy now whilst stocks last' approach. Some applicants have brought forward plans to trade up the housing ladder whilst others have used the current flexibility to remortgage, releasing capital straight away or building in a reserve facility from which to draw down funds for future debt consolidation, business funding, buy to let deposits, holiday homes etc.

"As for the long term fate of the self cert mortgage, only time will tell whether we see it disappear altogether but its demise can only be seen as a step backwards. Any return to a situation where lenders rely on rigid income multiples would pose freelancers with the dilemma of whether they work in as tax efficient manner as possible at the risk of prejudicing a future mortgage application.

"A shrinking number of schemes are still available on the current advantageous terms but it remains to be seen whether these will remain much beyond the November 1st."

Mortgages for freelancers
Tony Harris is a mortgage adviser with Contractor Financials who provide specialist recommendations tailored to the needs of freelancers. For more information about mortgages for freelancers and to use the online mortgage finder, click on:
Coulson Pritchard/Shout99 mortgage services for freelancers

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