Zero hours employment contracts and mortgages

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Flexibility on zero hours makes mortgage applications complex

If you have a zero hour’s employment contract you may find it difficult to obtain a mortgage since not all lenders will accept a zero hours contract as a suitable basis for employment.

Where zero hours contracts are accepted by lenders, the majority will look for a minimum two years history of the contract. Importantly, this should be two years without a break.

Mortgage lenders will typically calculate the average of your two years income when assessing the figure they can use in their affordability calculations.

If you have been on your zero hours employment contract for less than two years, there are mortgage lending options available where the lender will work with one year’s history.

Mortgage lenders offer standard interest rates to zero hours workers.

An independent mortgage broker should know which lenders will consider zero hours contracts and therefore be in a position to assist you with a mortgage or re-mortgage application.

If your zero hours contract means you are concerned about your mortgage options call us now on 020 8979 9684

What is zero hours contract?

In the video below Adrian and Ruth from Acas discuss zero hours contracts and how they affect employers and employees.

A zero hours employment contract is an employment arrangement where an employer offers work for workers to accept it. There is no obligation for the employer to offer work, nor for the employee to accept it. Zero hours contracts are therefore often used for care workers or catering workers where workloads can vary. Banks and financial services companies also make use of these contracts.
Zero contracts can cause a problem for mortgage lenders as they provide little certainty of ongoing employment and therefore income. As a result the more cautious mortgage lenders will not consider income from these contracts.

Zero hours workers have the same employment rights as regular workers although the way zero contracts work means that employment rights which accrue over time may be affected.
As a zero worker you are entitled annual leave, earning the national minimum wage and payment for work-related travel.

Depending on any agreement within a contract, a zero hours contract may mean that the contract is only in existence when work is provided. In these cases a full calendar week without work from Sunday to Saturday brings about a break in employment. This can cause a complication for mortgage purposes as lenders like to see continuous employment.

Where employment is continuous employment rights will accumulate over time. An example of this is annual leave where after the first year the worker does not need to accrue holiday before taking it.

Although zero hours contracts can seem casual, any disputes can be dealt with in an employment tribunal.

Zero hours contract facts

  • Zero hours workers have travelling time and waiting statutory rights in the same way as other workers
  • zero hours workers are not obliged to accept work offered
  • zero hours workers are entitled to annual leave
  • zero hours workers can obtain
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