Pick the right tools for your part-time clients

Rob Barnard

May 15, 2018

Rob Barnard (pictured) is sales director at Pepper Money

The rate of unemployment is now just 4.2%, according to Office for National Statistics (ONS) figures published in April. It has not been lower since the Bay City Rollers were at the top of the music charts and Billie Jean King won the last of her Wimbledon tennis titles in 1975.

Back then the employment landscape was completely unrecognisable to the world of work we know today. In fact, until the Employment Protection Act, which was introduced in 1975, an employer could legally sack a woman on the grounds of pregnancy.

It’s not just antiquated employment rights that have moved on. In 1975 just 8.7% of the working population was self-employed. Today the proportion of self-employed workers is 14.7%, even though the number has decreased by 30,000 in the last year.

While the number of self-employed workers has fallen slightly, the number of part-time workers has grown by 146,000 in the last 12 months. There are now 8.58 million part-time workers in the UK, which is made up of 6.3 million female part-time workers and 2.28 million male part-time workers.

ONS data on part-time workers doesn’t go back to 1975 – it only goes back until 1992. But then the number of part-time workers was 6.03 million, which means the number has increased by more than 42% in the last 26 years.

Some of this growth, particularly in recent years, has attracted controversy as the increasing use of zero-hour contracts has raised questions about the exploitation of workers, but median weekly earnings, from all income sources, for part-time workers have actually increased more than for full-time employees.

In the 2015-2016 financial year the median weekly income for part-time workers was £273.75, which is a 54% increase on 2000-2001, when it was £177.50.

The equivalent statistics for full-time employees show that in 2015-2016 the median weekly income was £423.25, an increase of 38% on 2000-2001, when it was £306.75.

This is all well and good, but why is it important to you?

The reason is that part-time workers rely on more diverse sources of income than their full-time counterparts. The ONS publishes detailed information on income sources, with the most recent set of full data based on the 2015-2016 tax year.

The information, which is split by gender, shows that the average female full-time employee receives 94% of her income through employment, with 3% coming from benefits and tax credits and the rest made up of other sources.

The average female part-time employee receives 70% of her income through employment, 16% through benefits and tax credits, 6% through pension income and the rest through investments and other sources.

The disparity between the two groups is even more pronounced amongst males. The average-time employee receives 95% of his income through employment with the rest made up of other sources such as investment or pension income.

In comparison, the average part-time employee receives 60% of his income through employment, 21% through pension income, 7% through benefits and tax credits and the rest though other sources such as self-employed ventures and investments.

If you’re working with a client who is one of the growing band of part-time workers, it’s therefore important you choose a lender that is able to fully consider their circumstances and different income sources, as this is likely to make a bigger difference to their overall affordability than a full-time employee.

Adverse credit history and recent self-employment may be the two most prominent circumstances a broker might think of for using a specialist lender, but complex income is an increasingly common reason for brokers to look beyond the high street.

At Pepper Money, we undertook some analysis of our own residential completions in 2017 and the most common characteristic shared by our customers was the requirement to consider additional income as part of their application. Nearly 60% of our completions last year were categorised as complex income.

This is another way for you to think about using a specialist lender as part of your toolkit. As a sector, we are here for clients with credit score fails, credit blips and those who are recently self-employed, but we can also provide an alternative option to help them to achieve their lending objective.

An automated approach to lending decisions can have in-built caps on the level of additional income sources it considers or may not include them as part of its affordability calculations at all.

A specialist, mandated underwriter on the other hand can make an assessment based on your client’s full circumstances and this includes recognising the importance of additional income. This could ultimately be the difference between them securing a new home or missing out.

It is 43 years since UK unemployment has been as low as its current level and the working environment has changed beyond recognition. Fortunately, so too has the mortgage market. You have access to the right tools to secure your clients the mortgage they need – you just need to know where to look.

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