According to a survey from Ipswich Building Society, which got responses from 476 first-time buyers in June, the number of prospective homeowners using a second source of income rises to 85 per cent in London.
The report continued that these additional income streams account for around two fifths of a deposit on average, which the mutual said was around £23,020 considering a typical first-time buyer’s deposit stands at around £59,000.
Nearly two thirds of first-time buyers said they would not have been able to raise a deposit if they did not have this extra income, and many said it allowed them to purchase a property quicker.
Sources of additional income vary, with a third starting their own business and under a quarter taking on informal work such as bar work in addition to their main job or leveraging skills from their main job to work on the side. A fifth said they did domestic work such as childcare.
The mutual noted that to be considered additional income it needed to be disclosed in an affordability assessment, but it was not a guarantee it would be considered.
Ipswich Building Society’s head of intermediary relations Charlotte Grimshaw said: “While an additional stream of income should be applauded, not every first-time borrower will be aware this extra revenue may not be taken into consideration for their affordability assessment.
“For clients with a second income stream we’d be looking for evidence of these earnings, such as payslips, or, for self-employment, a tax return. Crucially we need the applicant to demonstrate the additional earnings are ongoing and reliable, in order to be used for future mortgage payments.”
She added that the research showed first-time buyers using second streams of income would become more common as house prices continued to rise, and with them deposits.
She said it was vital for those with extra income streams to check with the HMRC about what additional income is and when it needed to be declared for tax purposes.