Lenders need to address complex income issues in mortgage market

Your home may be repossessed if you do not keep up repayments on your mortgage.

Nearly one in five employees receive overtime payments at work boosting their annual income, analysis conducted for Kensington shows, but not all mortgage lenders acknowledge these extra payments.

The specialist mortgage lender’s analysis of government data from the Annual Survey of Hours and Earnings shows 18 per cent of UK workers- the equivalent of 5.49million people – receive overtime payments.

Someone on average weekly earnings of £518 working a 37.5 hour week would earn more than £3,000 putting in five hours of overtime for 45 weeks which can add substantially to their ability to borrow and afford a home.

Kensington says that some lenders don’t fully take into account overtime, which would impact on how much they will lend borrowers.

The ONS data shows that overtime makes up 2.7per cent of total average earnings.

Men are more likely to receive overtime pay than women-the analysis shows 22.3 per cent of male workers earn overtime pay compared with 13 per cent of females.

There is major regional differences across the country on how many workers receive overtime pay- employees in Aberdeenshire are the most likely to receive overtime with 28.8 per cent of workers qualifying compared with just 9.6 per cent in Windsor & Maidenhead.

Keith Street of Kensington said: “Many lenders will focus on basic pay and will not fully account for overtime or other regular payments in their affordability calculations. This can have a major impact on a home if their total income includes regular overtime payments and, as our research shows it could prove a barrier to more than five million people.

“Kensington aims to treat customers as individuals. Every application is assessed by an experienced underwriter and we do not simply reject potential customers on the basis of standard checklists.”