Working nine to five no longer the norm

Once considered traditional working hours, working nine to five is far from a reality for a lot of today’s workforce.

It is just over forty years since Dolly Parton sang her iconic 1980s classic and in that space of time, we have seen a dramatic shift in working patterns. Contract workers, the self-employed, part-time and flexible workers all form part of a vast and varied workforce.

The latest figures from the Office for National Statistics (ONS) show there are just under 33 million workers in the UK. Included in this are 4.3 million self-employed workers, 8.3 million in part-time work and just over 1.2 million with second jobs, while slightly under 1.7 million work on a temporary basis.

Going back to 1992 when the data was first compiled, there were less than one million workers with a second job and only 599,000 self-employed part-time workers, compared to just under 1.5 million self-employed part-time workers today.

When it comes to meeting the needs of such borrowers, the mortgage market has not always kept pace with the changing nature of the UK's workforce, as highlighted in some recent research from Mortgage Broker Tools.

Its findings show that prior to the Mini Budget in September 2022, 28% of mortgage enquiries from self-employed applicants were unable to achieve the loan size requested as they were considered unaffordable, jumping to 37% post-Mini Budget.

While mortgage affordability will have since improved for a portion of these borrowers, the self-employed, whether they are sub-contractors, business owners, or those on zero hour contracts, can have a tougher time when it comes to getting a mortgage. This is due in part to the sometimes-fluctuating nature of their working hours and pay.

This can especially be true of those who are newly self-employed borrowers without at least two years’ accounts to demonstrate their earning potential – something that some high-street lenders require.

A second charge lender such as ourselves however, can take a holistic look at a self-employed borrower’s finances and accounts and through the use of tools such as Open Banking, take an in-depth review of their real-time finances. As such, it might be that an existing homeowner is able to borrow more through a second charge mortgage than they would be able to with a remortgage or further advance.

The latest Evolution Money second charge mortgage tracker shows the average loan size for prime borrowers in the three months to the end of February 2023 was £36,521, while the average loan size for debt consolidation borrowers was £24,183.

Our tracker also shows 68% of prime borrowers used a second charge for debt consolidation, with 11% raising funds for home improvement and 16% for a mixture of both.

Affordability will remain a key issue for many borrowers this year. Therefore, the inability of a lender to take a bespoke approach to a self-employed borrower’s income could see borrowers unable to borrow as much as they need, whether this be for debt consolidation or home improvements.

Chancellor Jeremy Hunt’s ‘back to work’ Budget is the first step in what is likely to be a prolonged push by the Government to get more of the UK’s estimated 19.1 million 'economically inactive' adults back into some form of work. This may see some increase in self-employment and non-standardised hours employment.

The mortgage and second charge industry will have to meet this with a commitment and willingness to cater to and help these types of borrowers.

If the number of self-employed borrowers continues on the upward trend, it will be crucial that when such clients seek financial help, we are able to accommodate their needs and assist this key group of borrowers.