A Recent Study Reveals Alarming Increase in Older Workers on Zero-Hour Contracts
According to new research, the number of workers over the age of 50 on zero-hours contracts has reached a record high of nearly 300,000. This marks the highest number of workers in this age group since records started being kept in 2013.
Zero-hours contracts, also known as temporary agency income contracts, have become increasingly popular in recent years as employers look for flexible arrangements with their staff. However, these contracts can also be very detrimental to workers, as they provide no guarantee of work or income.
Many older workers have found themselves struggling to make ends meet on these contracts, as they are often unable to find stable employment and are reliant on unpredictable and inconsistent hours. This can lead to financial insecurity and added stress, especially for those who are nearing retirement age and need to secure their future.
A zero-hours contract means that you are paid only for the hours you actually work but have no guaranteed minimum number of hours on the job at any given time. The opportunity for working – and earning your livelihood – is therefore highly irregular and uncertain.
That makes getting a mortgage fraught with difficulties since lenders are going to be looking for evidence of a stable, regular and reliable income.
The silver lining to that particular cloud is that not all mortgage lenders are the same and there are some who are prepared to consider your application even if your employment is by way of a zero hours contract. Here at NeedingAdvice.co.uk Ltd, we may help you identify those lenders and put you on the road to securing a zero hours contract mortgage.
Zero hour contract workers, and those who earn a living from temporary agency work, often face challenges when it comes to obtaining a mortgage. Due to their unpredictable income and limited job security, lenders may be hesitant to offer them a mortgage. However, with the right preparation and understanding of the options available, it is possible for temporary agency workersBorrowers who are employed by a recruitment agency. Read mor... to secure a mortgage. In this guide, we will discuss the steps you can take to increase your chances of being approved for a mortgage and the types of mortgages that are available to those with a temporary agency income.
Understanding Your Financial Situation
Before you start the process of applying for a mortgage, it is important to have a clear understanding of your financial situation. This includes knowing your credit score, your income, and your expenses. If your credit score is low, you may want to take steps to improve it before you apply for a mortgage. This can include paying down debts, making timely payments on your bills, and correcting any errors on your credit report.
It is also important to have a clear understanding of your income and expenses. You should be able to provide lenders with proof of your income, including your last three months’ payslips and a letter from your employer confirming your job title and salary. You should also have a good understanding of your expenses, including your rent or mortgage payments, utility bills, and other regular costs. It is always better to contact a mortgage broker before starting a mortgage application process.
Finding the Right Lender
Once you have a clear understanding of your financial situation, you can start the process of finding the right lender. Not all lenders are the same, and some may be more willing to offer mortgages to those with a temporary agency income. Look for lenders that specialize in mortgages for those with unusual or non-standard income sources. You can start your search by speaking to mortgage brokers, who can help you find the right lender for your needs.
Why is it difficult to get temporary agency income zero hour contract mortgages?
If you are working a zero hours contract, you are likely to be looked upon less favourably than someone with regular hours when it comes to applying for a mortgage. Since you have no guaranteed income, you are typically considered a higher risk, with a greater likelihood of missing your mortgage repayments in the future.
You are likely to be asked to provide evidence of your regular income to show that you are going to be able to afford the repayments.
If you are working a zero hours contract, however, evidence of that guaranteed income is going to be difficult to furnish since both the hours you work and therefore the income you receive is going to fluctuate and dry up altogether once the contract finishes and until you can renew it or find alternative employment. In a word, mortgage lenders will regard you as a higher risk.
But not all lenders are the same and some have different attitudes to others. Some might regard certain types of temporary contracts more favourably than others. Many IT professionals and even doctors, for example, work zero hours contracts with no guarantee of regular hours. Instead, they work when needed. Even though this may result in periods of sporadic employment, they retain a profession in which they are able to work on a more or less continuous basis.
This contrasts with someone who might be working a zero hours contract for a retailer who needs extra staff to cover a busy festive season, for example – and in that case, your chances of obtaining a mortgage are much slimmer because your employment is likely to last only a few weeks or months.
Once again, however, it is worth bearing in mind that all mortgage lenders are different, and all are going to treat applications on a case-by-case basis, taking into account a whole host of factors, including the type and nature of employment you have.
If you work as a contractor, for example, you might have the benefit of formal contracts showing how much you are going to be earning and for how long. In that case, evidence of those contracts may take the place of supplying several years’ worth of audited accounts in support of your mortgage application.
Lenders may instead determine your mortgage eligibility based on multiples of your annualized contract rate, which could lead to a successful mortgage application once your contract begins.
How can I improve my chances of getting a mortgage while on a temporary contract?
A variety of steps may improve your chances of getting temporary agency income zero hour contract mortgages. As you might imagine, these depend on your submitting the supporting documentary evidence of an appropriate level of income that is unlikely to come to an abrupt or sudden halt. In other words, be prepared to submit:
- all your payslips for the past year;
- two P60 forms or tax returns;
- evidence of your having done similar temporary work for at least the past 12 months – and preferably longer; and
- bank statementsA record of a borrower's financial transactions often requir... covering the past three years.
In addition, check your credit history and consider ways of improving your score – the official Money Advice Service suggests a number of ways you might do so.
How much deposit do I need for a zero hours contract mortgage?
The bigger your deposit, the less you need to borrow, the less risk any mortgage lender needs to take on and the greater the chances of your application being accepted, therefore, for a temp agency income mortgage.
Although it is possible to obtain a zero hours contract mortgage with a deposit as small as 5%, for example, lenders are going to take many other factors into account – including your credit rating. If you have a poor credit history, you might need a deposit of at least 15% of the purchase price of the home you want to buy – and possibly more, depending on just how poor your credit history is and how recent were some of the issues.
Next steps – Our guide to temporary agency income zero hour contract mortgages
If you are working a zero hours contract, securing a mortgage is likely to prove more difficult than for someone in permanent work with a guaranteed regular income.
Nevertheless, there are specialist lenders prepared to advance temporary agency income zero hour contract mortgages – and here at Needing Advice, we may identify them for you and help you secure the funding you need for the purchase of your new home.
What is a zero hour contract mortgage?
A zero hour contract mortgage is a type of mortgage specifically designed for individuals who work on a zero hour contract basis, meaning they have no guaranteed minimum number of working hours.
Is it possible to get a mortgage with a zero hour contract?
Yes, it is possible to get a mortgage with a zero hour contract. However, lenders may consider zero hour contract income as unpredictable, which could affect the mortgage amount they are willing to offer.
How do zero hour contract mortgages work?
Zero hour contract mortgages work in a similar way to regular mortgages. However, lenders may require proof of income stability, such as average earnings over a certain period, in order to assess affordability.
What is the eligibility criteria for zero hour contract mortgages?
Eligibility criteria for zero hour contract mortgages vary between lenders. Some may require a minimum contract length, while others may look for evidence of stable earnings over a certain period of time.
Are there any special considerations for zero hour contract mortgages?
Yes, zero hour contract mortgages may require some special considerations. For example, lenders may want to see proof of a stable income and may offer lower mortgage amounts compared to those on a regular contract.
What are the advantages of a zero hour contract mortgage?
The advantage of a zero hour contract mortgage is that it offers the opportunity for individuals on a zero hour contract to own their own home.
Can I get a zero hour contract mortgage with a bad credit score?
Yes, you can get a zero hour contract mortgage with a bad credit score, but you may be required to pay a higher interest rate or provide a larger deposit.
What documents do I need to apply for a zero hour contract mortgage?
To apply for a zero hour contract mortgage, you will typically need proof of identity, income, and residencyThe borrower's residency status, such as whether they are a ..., as well as any relevant bank statements and proof of depositEvidence that a borrower has the required deposit to purchas....
How much deposit do I need for a zero hour contract mortgage?
The deposit required for a zero hour contract mortgage will vary depending on the lender and the size of the mortgage. However, a deposit of at least 5% of the property value is typical.
What is the typical interest rate for a zero hour contract mortgage?
The typical interest rate for a zero hour contract mortgage will depend on a number of factors, including the size of the mortgage, the lender, and the borrower’s credit score. It is best to compare different options to find the best deal for your circumstances.