HSBC’s new mortgage rules make it easier for zero-hours contract workers to get on the housing ladder
HSBC is making it easier for zero-hours contract workers to get a mortgage by reducing the amount of paperwork needed to prove their earnings.
It’s the latest in a string of lenders who’ve relaxed the rules for those who don’t have a full-time job.
Before, buyers had to provide two years worth of documents to prove they’ve been working for the same employer.
Now, they only have to handover a year’s worth of documents including one P60 form – a HMRC document that shows how much tax you’ve paid on your earnings.
But borrowers will have to show three month’s worth of recent payslips, rather than the current requirement of just one one, to give a more thorough understanding of your earnings.
It’s the same application process for first-time buyers as those who are looking to remortgage.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the website.
Zero-hours contract workers are technically employed but have no guarantee that of any work.
Although they offer flexibility, the lack of regular working hours makes them controversial but many workers don’t have a choice.
And without a minimum number of working hours guaranteed, it makes assessing affordability for loans difficult.
Often applicants’ hours can change dramatically and employment can be unreliable.
These borrowers are viewed as a bigger risk to lend to, so require more paperwork and are often offered higher rates.
Around two million people are currently on a zero-hours contract, according to the Office for National Statistics (ONS), a figure that is steadily creeping upwards.
Given the rise in the number of people on these contracts, lenders are having to adjust their requirements.
Skipton Building Society, Clydesdale, Halifax, Metro Bank and Nationwide have all already tweaked their application process to help those with non-permanent work get a mortgage.
Aaron Shinwell, head of mortgages and savings at HSBC UK, said: “The reality is that a significant number of people – approaching two million contractors working an average of 25 hours a week – are on zero-hours contracts, and rely on them for their income.
“The flexibility suits their lives and their lifestyle, and their needs shouldn’t be ignored.”
It’s important you get the right paperwork together when you apply for a mortgage of else you’ll be rejected, which can leave a mark on your credit score.
This can affect any future applications. In fact, a poor score can leave you paying £262 extra every MONTH.
You can read our guide on how to improve your credit score before applying for a mortgage.
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