Enterprising couple floored by lenders: Tighter mortgage rules stop many self-employed people getting on to the housing ladder. Andrew Bibby reports

SOONER or later, Paul Kessling and Katrina Bryson will be home-owners. Both are graduates, Paul with an MA in ceramics from the Royal College of Art and Katrina with a first-class fine art degree from Goldsmiths' College. Both are clearly not short of the skills or confidence needed to succeed.

The participation of people like Mr Kessling and Ms Bryson is urgently needed to kick life into the market. However, at present, they are effectively excluded from getting a mortgage.

As lenders have tightened their criteria for loans, first- time buyers have faced growing difficulties in qualifying. This couple, however, has an additional problem. Having taken to heart the Government's lessons about the value of enterprise, they have created their own work, by starting a business restoring wooden floors.

They launched it in October, shortly after they were married, and are pleased with their first few months' trading. 'We feel we've seen a gap in the market,' Mr Kessling said. 'People are doing houses up rather than moving, and with the growth in the green movement, they are more interested in renovating what they've got.

'We're booked solid until the middle of February.'

However, their confidence and energy does not compensate, in mortgage lenders' eyes, for their lack of a guaranteed income. Lenders normally expect to see three years' accounts for self-employed borrowers. Without this track record, the only option the couple has is taking a chance on what is known as the 'non-status' mortgage market.

This route has become increasingly difficult of late.

Ian McKenna, of the mortgage broker Blyth McKenna, said: 'The non-status market has disappeared, especially for first-time buyers. There are virtually no lenders, apart perhaps from the rough end of the centralised lender market - not people we would deal with - where you would be paying through the nose.'

For several years Mr Kessling and Ms Bryson have rented a south London flat from a housing association, but because it is a short-life property, they have no long-term guarantee of accommodation and could be asked to leave at a month's notice.

'It seems like a really good time to buy,' said Mr Kessling. The couple have been considering properties up to about pounds 60,000: 'We're working like crazy now to build up as big a deposit as we can, and hope to have pounds 10,000 by the middle of the year,' he added.

Their savings are with Abbey National, which they hope will look favourably on any mortgage application. But at the moment the company says it could not help. 'To be honest, they won't yet know what sort of income they will be having. A big deposit shows effort and commitment, but while commitment is wonderful, it doesn't pay the mortgage. The last thing we want is to get them into a large debt,' Paul Burgin, an Abbey National spokesman, said.

Mr Kessling and Ms Bryson believe they have one trump card, the possibility they can persuade their parents to guarantee a mortgage. But even this offer is not, it seems, enough.

'The idea of a guarantee is to make a deal which is 90 per cent there already,' said Mr McKenna. Guarantors were ultimately risking their own homes: 'It's bad enough putting the husband and wife on the street, without having to repossess the parents' house as well,' he added.

Not surprisingly, lenders are cautious about accepting guarantees, and tend to check carefully that income is adequate to keep up with monthly payments.

Another possibility is to look for combined residential and commercial premises.

Mr McKenna points out that business mortgage rates tend to be higher than domestic rates and that special offers available for first-time buyers do not apply. 'We tend to do the opposite, splitting a semi- commercial loan in two to obtain a residential mortgage,' he said. His advice is for Mr Kessling and Ms Bryson to concentrate on their business before taking on the long-term commitment of a mortgage: in other words, to stay in the rental market for the time being.

If they were determined to buy, the most sensible course would be to talk to their bank, which would already have an idea of their business prospects, he said.

Before launching his own business, Mr Kessling did a similar job at another firm for 12 months. His take-home pay was less, but, ironically, his chance of obtaining a mortgage might have been better.

(Photograph omitted)