To say the UK workplace has changed over the past few years would be something of an understatement, however what’s also true is that the nature of work itself has also developed, and that’s a theme that has become ever more prevalent over a much longer period.
While ‘jobs for life’ still do exist, there is much more fluidity and flexibility amongst the UK’s workforce. For instance, according to ONS statistics, based on census results, the proportion of people changing jobs increased during the last decade, on average by 5.2% between 2010 and 2018.
There is a lot to be said about our current economic situation, but we also know there are a huge amount of job vacancies at present – between April and June this year, again according to the ONS, these numbered close to 1.3 million. It perhaps provides a greater opportunity for those who are seeking to change jobs or indeed pick up ‘extra’ work.
That greater level of fluidity, and perhaps today a greater sense of dealing with economic reality, means for example, people are much more likely to have multiple jobs which means multiple incomes. This of course can mean differing monthly incomes over a longer period, as individuals work different hours week to week, month to month, with take-home pay fluctuating.
Also, we have a growing band of freelance, contractor, consultants, self-employed people who will work across multiple jobs/projects, etc. Last year, the Department of Employment conducted research amongst 2,000 adults in England and found that 63% of them have multiple roles/jobs or are planning to do so when they enter employment.
This trend has given rise to the term ‘portfolio career’ whereby individuals look for multiple roles perhaps within a broader sector, or indeed look for somewhat different jobs across various industries depending on their skills, ambitions, but also economic necessity.
As such we as a mortgage sector need to be much more adept at adapting our systems and processes to meet the needs of today’s workers, and to be able to ascertain multiple jobs and incomes, plus fluctuating pay, into our underwriting assessments and decisions.
The good news is that this change amongst the UK workforce is not going unheeded, certainly not by Foundation, and it’s why we’ve seen a growth in demand for the specialist residential mortgage products we offer. When the above is happening, how could you be a lender who only assesses on a ‘primary income’ if there is so much more to an individual’s finances?
Over time, we have broadened out the income we will consider as part of an application covering those potential multiple sources but also 100% of bonus/commission; personal and state pension income; investment income; net rental income; maintenance income; maternity and paternity income; and trust income.
Without this approach we are not taking into account the full picture or the individual(s) ability to afford the mortgage on an ongoing basis. We would previously have called some of those incomes mentioned above ‘unusual’ but as can be seen, and as advisers will know only too well, these types are not so unusual any more, and you can sense a future not too far away where a majority of borrowers will come looking for advice and a mortgage with those multiple sources.
Whether that client is a professional starting out on career, a self-employed director with retained profits, a young first-time buyer with multiple jobs, someone looking to borrow into retirement and utilising SIPP income, there are a whole hosts of client types who will come to you with a complex case that needs a switched-on specialist lender willing to look beyond a residential vanilla approach.
A recent study Dr John Glen at the Cranfield School of Management suggested the specialist mortgage market will treble in size by the end of this decade, and given what is happening in our labour markets and the shift in the nature of work, you can undoubtedly see why. A strong specialist residential mortgage market will be increasingly vital to help these individuals utilise those incomes to secure the home finance they need.
George Gee is managing director – commercial at Foundation Home Loans