Mortgage Barriers for Temporary Workers

Strategic Insights -

Temporary workers in professions like nursing, teaching, and engineering face significant barriers when seeking mortgages due to the traditional reluctance of lenders to provide loans to those not in permanent full-time employment. Lenders' concerns about the continuity of employment and income stability have led them to apply more stringent tests to borrowers on fixed-term contracts. As a result, many workers, particularly first-time buyers, find it difficult to secure a mortgage, especially when the loan exceeds 75% of the property price.

Key Takeaways:

  • Lenders apply more stringent tests to borrowers on fixed-term contracts than those in permanent employment, often requiring evidence of steady income over the previous three years.
  • Professions like nursing are treated more favourably, but difficulties in arranging a mortgage become more acute when borrowers want a mortgage of more than 75% of the property price.
  • Many lenders require borrowers to pay for mortgage indemnity insurance, which may not be available for workers on fixed-term contracts, particularly first-time buyers.
  • Abbey National and Britannia are unlikely to provide a loan for anyone on a contract lasting under two years, while Alliance & Leicester finds it "extremely difficult" to provide a loan for someone employed on a contract that only runs for the duration of a project.
  • The Institute of Personnel and Development, representing 73,000 personnel managers, advises building societies to be more flexible in their lending policies, acknowledging the rapid changes in working practices.
  • Nurses are increasingly being put on short-term contracts by their trust employers, adding to their stress and making it harder for them to obtain a mortgage.

Statistics:

  • 73,000 personnel managers are represented by the Institute of Personnel and Development.
  • Abbey National and Britannia will not provide a loan for anyone on a contract lasting under two years.
  • Alliance & Leicester considers it "extremely difficult" to provide a loan for someone employed on a contract that lasts only for the duration of a project.
  • Some lenders require evidence of steady income over the previous three years for borrowers on fixed-term contracts.
  • Mortgage indemnity insurance may not be available for workers on fixed-term contracts, particularly first-time buyers.

Sources:

  • Unnamed Royal College of Nursing spokesman
  • Lenders (unnamed)
  • Angela Baron, policy adviser to the Institute of Personnel and Development
  • Institute of Personnel and Development
  • Abbey National and Britannia