News Article

Bank Lending

Talking about mortgages for contractors

By CreditMan Wednesday, September 18, 2013

4.18 million People recorded as self-employed in the last quarter: Are there suitable mortgages available to support the growing force?

An economic review recently compiled by the Office for National Statistics (ONS) has revealed several key indicators of a recuperating economy in the UK. Such an economy has numerous common traits, one of which is the availability and variety of mortgage products currently available. As a nation proud to champion the notion ‘Home is where the heart is.’ Home ownership has always been and will continue to be, promoted as a driving force for our economy. The question that sits on all of our lips’ is; will the mortgages be available to the businesses and people that want them?

The Labour market statistics from April- June 13 showed that total pay has risen by 2.1% compared with the same quarter for the previous year. The economic policies to ease the stress on our previously ailing economy are starting to have a distinct quantifiable effect. Things are looking up. It is however, also true that house prices are rising at an exponential rate and this can cause problems with first time buyers, especially those in the self- employed sector trying to qualify for a mortgage to get themselves on the property ladder. Although it can be difficult, there are still great deals available out there on many properties. More importantly commercial and residential mortgage lenders along with secured loan lenders, are certainly re-acquiring a once disposed appetite to lend.

The statistics from April- June 13 have reported an increase of 6000 people in the self-employed sector from the previous quarter and have reached a level of 4.18 million. A jump to almost 15% share of the employment type market. Various lenders’, including many high street bank’s, are recognising the need for suitable contractor mortgages to accommodate this undeniable, growing force. Mortgages that specifically allow for the differing nature of self- employed, contractor and sub-contractor income to justifiably qualify for a mortgage within their affordability.

This brings us onto some of the key lenders of the moment dealing with contractor mortgages. What many people do not realise is that although they are referred to as a contractor mortgage, you are still securing a regular residential mortgage, and it is simply the application criterion that differs. This is great news as it means applicants can still secure some of the best rates on the market. At this current time, Halifax Building Society for example, has crafted decisive lending criteria that values several different employment situations. To highlight a few principal points:

- A sub-contractor will be considered from the fixed or short term contracts, even including agency workers.
- They only require 12 months continuous employment with 6 months on the contract remaining.
- For IT or other contractors whose income is more than £500/day or alternatively £75,000 per annum, they will accept the gross value of the contract as evidence of income.

The mortgages are out there.

In the same report the ONS have established that the employment rate is currently sitting at a rate of 71.5% up 0.1% from the first quarter of 2013. Many companies both large and small frequently employ contractors and sub contractors what is clearly a mutually beneficial relationship. With businesses providing jobs for the employed persons, all are inherently linked. Companies need to grow and evolve as the employment figures rise to maintain a healthy outlook and discourage a fall in national output. Employment and the income received as a result, are discerning factors of economic performance and Gross Domestic Product (GDP) for this to continue to rise we rely heavily on those responsible for the employment. A growing economy provides opportunities for investment that should be taken advantage of and the commercial mortgage sector and business finance can be a prerequisite to establish a route to accessing certain key investments in many circumstances. For example, if you have expanded your company it may be time for you to consider buying your own premises with a commercial mortgage, an investment that would increase the value of your company and accommodate your expansion. Business finance can help a company to reach levels they may never have expected. I as mentioned earlier a company’s success is intrinsic to its employee’s and the economy on a larger scale.

In a market often considered tricky to navigate, the market behaviour; especially involving the increase in mortgage lending, is suggesting a steady improvement. On all sides there are businesses, contractors and employee’s alike frothing at the bit to have an indispensable asset like a property. As the demand is there, the supply will reflect it with an increase in competitive products. It is inevitable that there will be many cost effective deals to be had. The lenders are willing, the clients are willing, with a specialized mortgage broker acting as an intermediary to establish the suitable products for individual circumstances, the amount of mortgages provided will continue to rise. A clear positive correlation with the employment level rises for this quarter.

The signs of recovery are staring us in the face.

It is vital that we should proceed with caution and learn from the recent recession but it is also true that we cannot further hinder our recovery by ignoring the signs of growth for fear of once again being burned, so to speak. Whilst many discard the self employment mortgage market as overly harsh and ineffective the greater availability of commercial and contractor mortgages is a clear indicator of a recovering economy and a sign that we will be able to provide mortgages to those who can afford them. By learning from previous mistakes, the lenders and lets not forget clients, can help to shape a steadfast mortgage market with key safeguards in place to maintain a mutually conducive economic recovery, all the while providing mortgages for those that need them.