With zero hour contracts becoming more mainstream in recent years (with over 900k people employed in such contracts), mortgages have been tough to get in the past due to inconsistent earning patterns and no proof of guaranteed work in the future. However some lenders are starting to realise that for some people, affordability just isn’t an issue. They’ve been with the same employer for over two years or consistently work full time hours – and some lenders are changing their lending terms to reflect this.
Zero hour contracts cover many sectors such as accommodation and food, health and social work and wholesale and retail. There are five times more people on zero hour contracts than there were five years ago and almost a fifth of people on such contracts fall into the age bracket where people are most likely to buy their own property.
Ipswich Building Society is just one such financial institution that has amended its lending terms to allow creditworthy zero hour contract workers access to its range of mortgage products. Many of these workers typically face difficulty when applying for a mortgage because they do not have fixed contracted hours of employment and therefore fail to meet the underwriting criteria of some banks and building societies.
Ipswich Building Society takes the personal situation and income circumstances of each applicant into account by applying its manual underwriting procedures to all mortgage applications, as opposed to the ’automatic’ underwriting approach. Zero hour workers need to have a minimum of 18 months history of working within their role and be able to supply their P60 and 3 month’s payslips along with our other standard supporting documents in order to be assessed for a loan.
The latest data from ONS for April 2016 to June 2016 revealed that more than a third (34.2%) of zero contract employees actually worked full time, with 41% having been with their employer for 2 years plus – so affordability wasn’t a problem at all.
This change in lending criteria from Ipswich Building Society will be effective from 1 st March 2017, available across all products to direct applicants and selected brokers.
So it is possible to get a mortgage on a zero hour contract – let’s hope other financial institutions start to cotton on soon too!
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