It’s fair to say that our working lives, the way we are paid, the jobs we choose to do, the approach to how we do them, is changing. The pandemic/lockdown appears to have pushed this on, but even prior to this period, it was self-evident that the old way of working – one job, one income, PAYE taxed at source – was nowhere near what an increasing number of people were experiencing.
At the start of the year, research by Censuswide revealed one in 10 UK employees – approximately 4.5 million people – were, at the very least, considering taking a second job.
The official ONS stats suggest there are currently around 1.2 million people in the UK already in this situation, however Royal London research from last summer, suggested that just prior to this period, 16% of workers – that’s over 5.2 million people – had taken on an additional job.
Now, for some, this will clearly be a temporary arrangement designed to help with specific money issues, most notably the increased cost of living, but what is also interesting about that Royal London report, is what it suggests might happen if the cost of living continued to increase from that point, and I think we’d all agree it’s certainly done that.
The research said that the number of those with an additional job could rise to just below 10 million, and it would be safe to say that within that number you would have a significant number of homeowners, who will have seen not just energy/food/petrol, etc, costs rising, but potentially their mortgage costs.
It is estimated that in June alone, 100,000 households were coming to the end of their fixed-rate mortgage deal, and the vast majority of those who took out those deals two/three/five years ago, were going to find a mortgage market which looks very different to back then, with rates far higher than they would previously have been on.
Of course, June is no different to any other month through the rest of 2023 and into next year, and advisers are likely to see a considerable influx of remortgage business during this period from clients in this situation, but for whom their circumstances have changed and potentially look very different to what they did last time they were serviced.
Marrying up these two issues and these statistics is not difficult – advisers are much more likely to be seeing clients who, over the course of that time period, have undergone a shift in their income, or indeed the way their income is generated.
In other words, multiple income sources are now far more prevalent as individuals seek out new ways to bring in more money via extra jobs, but also in terms of the structure of how many more people are employed and paid.
So, for example, not only might advisers be seeing households where those applying for the mortgage might each have two or more jobs, but their incomes are now more likely to be made up from sources such as commission or bonus payments – which can differ over time; they could come from trust income or land and property, it might come from a pension, or maternity/paternity pay, it could come from investments that have been made or buy-to-lets, for example.
It’s not therefore just the case that multiple income sources are the preserve of those looking to make ends meet, via working more jobs, but as more individuals see the benefits of diversifying in terms of their assets, then the income will flow from different parts of the overall portfolio.
As lenders we have to be on top of this, and that can be difficult for the mainstream/high-street players who are more likely to use an automated underwriting system, rather than being able to underwrite manually as we do, taking into account all those potential disparate income types from either jobs or those sources outlined above.
When you manually underwrite, you can get a full picture of circumstances and confidently use 100% of all those income sources, whereas other lenders may have to only accept 50% of them. That doesn’t reveal the true picture, and therefore doesn’t seem fair on the applicants who, quite rightly, will argue that all the money coming in – regardless of source – should be taken into account when assessing affordability and making the lending decision.
Specialist lenders underwriting manually are able to look at the whole picture, rather than an automatic 50% approach, and by doing this, can provide positive lending decisions to those who choose to run their working lives in a less traditional way, or indeed those who have diversified and are reaping the income rewards of doing this.
This seems even more important in this current, higher-rate environment, because otherwise you’ll have borrowers rejected when, if you take all income into account, they should be able to afford the mortgage required comfortably. We certainly want to work with advisers and their multiple job/income clients to ensure they have a seamless remortgage transition and their working/investment decisions are not held against them.
Grant Hendry is director of sales at Foundation Home Loans
https://www.peoplemanagement.co.uk/article/1809546/four-million-uk-workers-considering-second-job-combat-cost-living-survey-finds
https://www.crunch.co.uk/knowledge-employment/id-like-a-second-job-what-do-i-need-to-know#:~:text=According%20to%20the%20Office%20of,UK%20have%20a%20second%20job.
https://www.royallondon.com/about-us/media/media-centre/press-releases/press-releases-2022/september/cost-of-living-crisis-leaves-millions-taking-on-second-job/#:~:text=16%25%20of%20workers%20(5%2C239%2C360),report%20can%20be%20read%20here.
https://www.theguardian.com/money/2023/jun/05/uk-banks-pull-hundreds-more-home-loan-deals-as-fixed-mortgage-rates-rise