Northern Rock relaxes lending criteria for contractors

Mortgage lending companies have been demanding to see three years trading history before they would grant a home loan and for many freelancers, this requirement has meant that realising their dream of owning a home has been delayed.

However, the Northern Rock has come to the rescue and relaxed its lending criteria for self-employed borrowers. The state backed bank now says freelancers are eligible to apply for a mortgage if they can produce their trading history for the last two years.

Concerns have been raised recently that the self-employed fear they will be rejected when they apply for a mortgage, even though there are companies that offer specialist mortgages for contractors based on yearly contract rates.

A spokesman for Northern Rock explained that this policy change is in the best interests of the bank's customers. If freelancers already have two years of accounts it means they are in their third year of self-employment. The change in policy falls within the bank's risk appetite, the spokesman added.

Meanwhile, HMRC recently issued guidance to help the self-employed put aside enough money to cover their annual self-assessment tax liabilities.

When a person first becomes self-employed, they have to wait for quite a while before they receive their first tax bill. The Revenue has now produced a table that shows the approximate amount, based on weekly and monthly profits, that needs to be set aside. The figures do not include Class 2 National Insurance payments but as these are only about £2.50 per week, they provide freelancers with a reasonable estimate.

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