Mortgage advisers and brokers have warned that the increasing number of people working to ‘zero hour contracts’ and becoming self-employed are facing a battle to secure home loans.
With many young people working zero hour contracts – which sees them being effectively ‘on call’ – first time buyers are particularly at risk. With no guaranteed weekly working hours, proving a steady income to lenders will be hard for many.
Lenders increasingly need a consistent history of guaranteed earnings to offer the best deals.
In some cases too, such as with the Santander Group, zero hour contracts are classed as secondary incomes, thus contributing only half of a borrower’s total net worth.
Santander also requires its borrowers to have an evidential minimum of 12 months in their role. HSBC demands a three year work history.
Six years ago, according to data from the Office of National Statistics (ONS), there were 143,000 such workers in the country.
The most recent ONS figures now show this at 583,000. That is a rise of nearly 408%, but the true figure could be far higher according to Unite. The trade union says that many people are employed this way without knowing it.
A high proportion of these are under 30 too, many of them being university graduates taking up such roles whilst waiting for a permanent contract.
The ONS also shows that the number of self-employed workers is increasing, up by 2% to 15% from 2008.
With self-certification loans no longer available, these workers too are increasingly finding it a challenge to secure a loan without a minimum of two years’ self assessment statements or accounts.