Thursday 30 November 2017

Mortgage lenders starting to look at multiple income sources and zero hours contractors

Author: Editorial Team

Mortgage lenders contracts

Zero hours contracts and flexible working are fast becoming an integral part of professional life in the UK. Increasingly, workers are taking advantage of the ‘gig economy’ to find flexible work and more employers are using unsecured contracts to source staff when they need them. Mortgage lenders are now responding to the changing employment landscape by looking at various revenue streams when calculating loans, something that is potentially good news for homeowners without a standard contract.

Zero hours contracts

In May 2016, the number of workers on zero hours contracts reached a staggering 1.7 million. This represents 5% of all employment contracts in the UK, meaning that a considerable proportion of the country’s workers have no guaranteed income at all. Although the numbers have dipped a little in 2017, there are still an estimated 1.4m zero hours contracts in the UK.

In around 25% of cases, people on zero hours contracts want to work more hours. As @RJPartington says writing in the Guardian:

“The ONS found someone on a zero-hours contract works 26 hours a week on average, while more than a quarter want more hours. [..] By comparison, 7.2% of other people in employment wanted to work more hours.”

Unsecured employment and mortgages

Due to the increasing importance of unsecured contracts, lenders are now beginning to take zero hours employment into account when calculating loans. Homeowners who already own a property may find they can use their zero hours contract to apply for a second charge mortgage and that their other income streams are taken into account when making the application.

Although multiple unsecured contracts won’t go a long way to securing a first charge mortgage, lenders are looking for ways to make second charge mortgages more affordable and to ensure lending criteria reflect the changing nature of the UK workplace.

What is a second charge mortgage?

A second charge mortgage is a loan that’s taken out by a homeowner and secured against the value of the property. The second charge mortgage is separate from the initial mortgage and will be subject to different fees, interest rates and terms. Often, homeowners take out second charge mortgages because they have a good rate with their current lender and don’t want to remortgage, in order to release the equity tied up in their home. In some cases, second charge mortgages are more affordable and easier to arrange than remortgaging a property.

If you have a zero hours contract or multiple income sources and want to find out more about securing a mortgage or loan, give us a call and speak to one of the expert members of our team today.

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Written by: Editorial Team