Most lenders assess applicants’ employment status in very binary terms: they are either employed or self-employed.
Increasingly, however, more people are opting to become contractors and, according to data from the Interim Management Association, it’s a sector that has grown by 93% since the pre-credit crunch days of 2006. In total, there are estimated to be 15,000 top-flight interims (according to MORI research) and a further 80,000 management consultants. The interim sector is estimated to be worth £1.5bn a year and the consultancy sector a further £8.5bn.
In summary, the contractor market is big by any standards and it’s continuing to grow. Senior contractors typically demand rates of between £1,000 and £2,000 a day and generate substantial incomes.
Surprisingly, very few lenders know how to treat contractors when it comes to assessing their mortgage applications, because neither the employed nor self-employed models work terribly well for this group.
Which is precisely why Saffron For Intermediaries decided to include a Contractor Mortgage as part of our Special Situations range. The product is aimed specifically at individuals working on a short-term contract basis and has been designed with the following features:
• Available up to 90% LTV
• Applicants annual income is assessed based on their daily charging rate x 5 x 48
• Discounted rates start from 3.99% for 80% LTV loans, rising to 4.99% for 90% LTV loans, with no early redemption penalties
• A limited tranche of fixed rate funding is also available, with 2 year fixed rates starting from 3.57%
• An innovative capital repayment facility* which enables borrowers to repay capital and reduce their mortgage rate, if they move into a lower LTV band (there is no additional fee for this facility)
• There are no restrictions on the type of contractors we will accept
• Applicants require a minimum of just 6 months contracting history, for loans up to 80% LTV (rising to 2 years’ history at 90% LTV)
As with all our mortgages, we assess each application based on its own merits and we don’t use automated credit-scoring systems.
Applications should be supported by documentary evidence of current and past contracts, along with the last six months invoices and bank statements showing all invoice credits. We would also like to see a copy of the applicants CV showing their previous employment history.
Work patterns are continuing to change in the UK and we believe it’s important that lenders’ product and services keep up with those changing patters.
If you have a client with a contract on their head, then come and speak to us at the Saffron!
* The capital repayment facility is available with discounted variable rate products only. It is not available with fixed rates.