" A significant source of complex income mortgage applications comes from a more conventional form of employment."
The rise of complex income has been a significant characteristic of the intermediary mortgage market in recent years, driven by changing employment patterns and continued house price inflation that has required homebuyers to use all of their available income to demonstrate affordability.
According to the ONS, on average, in 2017 the average house price in England and Wales was 7.8 times the value of a full-time worker’s annual workplace-based earnings, which was an increase of 2.4% on 2016. While prospective first-time buyers in London had to spend around 13 times their earnings on property.
The growth in self-employment and contract workers have certainly contributed to demand, but a significant source of complex income mortgage applications comes from a more conventional form of employment.
The NHS is the country’s largest employer, with a workforce of 1.5 million people across the UK and it is doctors and nurses who combine their basic rate income, NHS bonus income and private practice work, who account for one of the largest groups of mortgage applicants with complex income requirements.
Figures published earlier this year revealed that the highest paid doctor in the NHS earns £740,000 a year, which is £637,000 more than the maximum consultant’s salary of £103,000.
In addition to their basic salary, consultants can be paid up to £77,000 in additional annual bonuses which are awarded by a system of merits and once a bonus is given, it is normally handed out for life, and is pensionable. Overall - 22,874 of 43,856 consultants in England – so more than half – received some kind of bonus, of between £17,000 and £77,000, last year.
And this before you start to include extra earned income from private work on top of their NHS employment. A side-line in private practice is a popular move amongst NHS doctors and nurses, and a recent survey by medical website, Medscape, found that about a quarter of physicians have begun offering additional services to increase income.
Applicants with multiple sources of income, particularly employed applicants need a lender that is not deterred by these complexities, but instead gives its underwriters the autonomy to come up with solutions that strike a balance between the clients’ requirements and maintaining a responsible and sustainable approach to lending.
If you have clients who work for the NHS, a lender that specialises in complex income could be just what the doctor ordered.
