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Almost two thirds of first time buyers rely on a ‘side hustle’ when saving for a mortgage deposit according to new research

6 Sep 2021

4 min read

Added: 06 September 2021

 Almost two thirds of first time buyers rely on a ‘side hustle’ when saving for a mortgage deposit according to new research from Ipswich Building Society

Despite being labelled as the ‘bank of mum and dad’ generation, 64% of first time buyers have a second source of income to help them save for a deposit, with this figure rising to 85% in London, according to a new survey* from Ipswich Building Society.

Not only are a large number of first time buyers relying on this additional income stream, it is also making up a substantial portion of their deposit. The earnings from this extra work account for two fifths (39%) of a deposit on average. With a typical first time buyer deposit sitting at almost £59,000, that works out at £23,020 being generated from so-called ‘side hustles’.

Nearly two thirds (62%) of first time buyers doing extra work claim they would not have been able to save for a deposit without this extra income, while 63% believe it enabled them to purchase a property sooner.

Kevin Davis, Head of Direct Mortgages at Ipswich Building Society said: “There’s been much discussion in recent years of the rise in gifted deposits, where parents and grandparents are keen to help their children get a foot on the property ladder, however that’s simply not an option for everyone. This research highlights the fact that this generation are committed to helping themselves rather than solely relying on older family members for handouts. With the impact of the pandemic, along with increasing house prices, you might expect younger people to be put off seeking a mortgage, but as many as two in three are taking on second jobs to buy their first home.”

Sources of additional income vary

Of those prospective first time homeowners who disclosed a side hustle, a third (32%) have started a business, half of which were related to their main job, and half starting a venture unrelated to their current employment.

Other common forms of side hustle include taking on informal work such as a bar job at weekends in addition to their main career (23%), or using skills from employed roles to earn extra money on the side (22%) i.e. a developer may design websites for friends and family after normal work hours.

A fifth (21%) were prepared to do domestic work such as childcare, gardening or cleaning to raise that all-important deposit.

Showing dedication to the cause, 66% of those surveyed are considering continuing the extra hours to help fund house renovations or furnishings once they have purchased a property.

Calculating affordability assessments

Typically, lenders will only become aware of their first time buyers’ side hustles, if they are declared during the application process, in order for the additional income to be used for affordability assessment. However doing so is not a guarantee that they will be taken into account, and may bring with it further considerations.

Kevin Davis continued: “While working on an additional stream of income shows a commendable effort and signals the traits of a reliable borrower, there’s no guarantee it will be taken into consideration for ongoing mortgage repayments and it’s something first time buyers should be aware of before they apply as they could be turned down on this basis.

“If they do wish for this income to be used in affordability assessments, and not just as a means to build up a deposit, then they need to demonstrate that this income is ongoing and provide payslips, in addition to those of their regular, employed income. Where the additional income is from self employment, applicants should be prepared to provide a tax return as evidence.”

First time buyers, and anyone else with a side hustle for that matter, should also check with HMRC about what constitutes additional income and when this needs to be declared for tax purposes. First time buyers may also need to ensure they are not breaching any contractual obligations with their main employer too.

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