You can get a mortgage on a zero hour contract

Zero hour contracts (ZHC) have been around for a long time, but it is only during the last five years or so that the number of people employed on these terms has exploded across the national workforce. The latest figures from the Office of National Statistics show that 910,000 people are employed on ZHC’s, which represents 2.3% of the workforce.

That figure of 910,000 workers on ZHC’s is almost certainly an underestimate as some of those will actually have two or more jobs on this contractual basis so the numbers of these employment contracts is growing very rapidly as employers seek maximum flexibility in workforce planning and deployment.

You would expect some fast food and seasonal companies to maximise the use of ZHC’s, however I am surprised to learn that many traditional concerns are migrating their staff to zero hour contracts. For example, Buckingham Palace is said to employ 350 of its seasonal staff on ZHC’s and the Tate Galleries also uses this approach for its catering staff in its Tate Catering division.

So if you are on a zero contract, you are in good company!

ZHC employment flexibility can come with a cost

Zero hour contracts may seem to favour the employer as it seeks to match staff numbers to fluctuating business conditions, however there are also considerable benefits to the employee seeking flexible working conditions, particularly of they have skills that are in demand.

Those on ZHC’s don’t need to accept work when offered by their employee and they are free to work for another employer whenever they choose. They are also entitled to paid annual leave and the National minimum wage.

Depending on their lifestyle, those holding a ZHC can benefit from this working arrangement as much as their employer gains in flexible workforce management.

This all sounds great, but there is a problem if you want to borrow money for a significant purchase such as a car. When it comes to arranging a mortgage for a house purchase, a zero contract can become a distinct problem.

Saying No

Mortgage lenders like financial stability as this gives them confidence that repayments will be reliably received over the term of the loan. This is why they go to great lengths to verify earnings and time in employment as well as looking into the financial health of applicants in a detailed way as possible.

Having an employment contract which offers no guarantee of work is not something that banks have liked and they have been quick to reject these applicants in the past.

Mortgage lenders are changing their approach to Zero Hour Contracts

With so many workers on zero hour contracts, and with these numbers set to rise in the future, some forward looking lenders have started to realise that ZHC based workforce may show more stability than previously thought.

The ONS data tables show some remarkable statistics that point to underlying stability amongst those on ZHC’s.

For example, many people on ZHCs have been with the same employer for over 2 years and a third of people work full time hours, These workers are exhibiting the kind of employment stabilities that mortgage lenders like, which is why some mortgage providers are now accepting applications from people in ZHC’s.

Mortgage payments

The Ipswich Building Society is one such mortgage provider. They try to help such people and instead of the usual ‘computer says no’ approach, will consider applications on a case by case basis.

They are used to working with unusual circumstances and really want to help make access to the housing market fairer. As long as you can provide evidence of 18 months employment history, alongside three months of payslips, and can supply a P60 to cover this period, Ipswich Building Society will consider you for a mortgage, if you are on a ZHC.

You will, of course, have to meet their usual lending criteria such as mortgage affordability and credit scoring, but it is reassuring that you are no longer locked out of the property market if you are on a zero hour contract.

The future is looking brighter for Zero Hour Contract holders

The mass adoption of ZHC’s by employers in many industries and the certaintity that this trend will continue to rise in the future, is changing the way that banks and other lending institutions regards this form of employment.

Being on a ZHC is no longer a stigma, but is seen as a reality that offers people employment and financial stability as well as the flexibility to change jobs quickly or tune the working week to the needs of a family.

Whereas this once precluded access to mortgages and other forms of borrowing, mortgage lenders such as the Ipswich Building Society are adapting to these new realities and offering mortgage opportunities that allow people to gain that vital foothold on the property market.

That is very good news indeed!

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