ResidentialJun 12 2018

Pepper introduces day rate contractor mortgage calculations

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Pepper introduces day rate contractor mortgage calculations

Pepper Money has introduced day rate calculations to assess the affordability of mortgages for contractors.

Contractor mortgages are available across Pepper's entire range, but now, the lender will also look at income based on their daily rate, whether they are self-employed, working via a limited company or umbrella company.

This will particularly benefit contractors whose chargeable rate has increased in the last year, where the latest set of accounts does not reflect that increase.

Rob Barnard, sales director at Pepper Money, said: "The employment landscape is changing and an increasing number of people are turning their backs on life as an employee to work on a contract basis, which can give them more freedom and potentially be more lucrative.

"It can also be uncertain and it is not uncommon for contractors to experience periods of cash flow strain that can make their financial circumstances more interesting.

"Fortunately, at Pepper, we thrive on interesting cases, and with the introduction of day rate calculations, we are able to offer a solution that recognises the current earning potential of your contractor clients even if they have experienced credit problems in the past."

In calculating contractor income, Pepper will use either the 12-month average day rate times five days per week times 46 weeks, or the current day rate times five days per week times 46 weeks -  whichever is the lesser amount.

This means that a contractor who has been earning £350 a day for the last six months but was on a contract for £250 a day for the previous six months, would be assessed on an average day rate of £300.

The lender will accept applicants who can demonstrate a minimum of 12 months history of being a day rate contractor.

Their track record does not need to be in the same line of business, but they must be in a contract when making the application.

Daniel Bailey, principal at Derbyshire-based Middleton Finance, said: "Mortgages for contractors can be a niche area of lending so it is welcome news Pepper are offering mortgages for contract workers. 

"I am experiencing an increase in enquiries from contract workers so it is great news to have another lender adding competition to this market and a degree of flexibility."