Zero hours contracts should not mean no mortgage options – Cleary

A strong and varied workforce, as evidenced by the recent news that the number of people in work in the UK is also at a record high, is something to be celebrated.

However, the figures don’t tell the whole story.

The ONS figures also showed there were nearly 850,000 people in employment on zero hours contracts in their main job.

Long-term there has been a significant rise in the number of people in this type of work.

The ONS Labour Force Survey reported just 143,000 people in employment in October to December 2008 were on a zero-hours contract. In the same period last year, that number was 844,000.

Treated as employees

Zero hours contracts are a point of contention for many people.

One side, typically employers, argue they are flexible and provide employees with choices; the other, the workers themselves, claim they have reduced rights as a result.

There have been several high-profile court cases on the subject, most notably brought by Deliveroo couriers and Uber drivers.

Uber drivers won the legal right to be treated as employees, thereby qualifying for sick pay, maternity cover and holiday pay among other things. Uber meanwhile is appealing.

Affordability challenges

As many self-employed workers are also on zero hours contracts, they can face difficulties when trying to secure the mortgage or loan product they want.

Many of them are still being turned down by mainstream lenders because their income is deemed to be too complex or unpredictable.

Much has been written about the growing need for mortgage finance for the self-employed and those on zero hours contracts.

Ourselves, and other specialist lenders and building societies, have worked closely with brokers to develop our criteria so that we can help more self-employed mortgage applicants.

There are several challenges when it comes to assessing affordability for the self-employed, but particularly for those on zero hours contracts.

For example, TUC research found that on average, zero hours employees work 25 hours a week, compared to the average employed worker who works 36 hours a week.

The TUC figures also showed that 16 per cent of zero hours workers do not have work every week, while ONS figures found that a third of zero hours workers have been with their current employer for less than 12 months.

Responsibility for lenders

However, just because people choose to work in this way, that doesn’t mean lenders can’t lend to them.

We have developed criteria specifically aimed at supporting borrowers who choose to work on zero hours contracts, and recently extended our criteria to include second applicants.

Zero hours contracts are now permitted when the secondary applicant (i.e. not the main income earner) is employed on this basis.

In order to be as flexible as possible, we only require payslips covering the last six months and the borrower’s latest P60.

Eligible income is the lower of the average pay from the last three months or last six months.

Whether or not zero hours contracts should be banned is up to others, but while they exist, there is a responsibility among lenders to not unfairly exclude these workers from the chance to own a home with a mortgage.