Home truths for teachers on contracts
Teachers on temporary contracts, most of them women, are finding it hard to persuade banks and building societies to lend them the money to buy their own homes.
The number of teachers on temporary or fixed-term contracts has been rising for more than a decade. A survey by the National Union of Teachers found that in 1995 fixed-term contract holders made up 9.25 per cent of the full-time equivalent teaching force in England and Wales. This compares to 8.69 per cent in 1993 and just 4.55 per cent in 1983. Of those teachers on full-time fixed-term contracts in 1995, 81.1 per cent were women.
In Scotland, the growing casualisation of the profession is also putting home ownership out of many teachers' reach, according to the main teachers' union, the Educational Institute of Scotland.
"People on temporary or fixed-term contracts often come to us and say that the main reason they are desperate for a permanent contract is that the building societies won't look at them," says EIS assistant secretary Ken Wimbor.
But lenders' attitudes do vary. "No lender automatically blackballs people on temporary contracts - and lenders certainly wouldn't tell you they did. But they do find reasons not to give loans," says Hugh Nichols, assistant general manager of the Teachers' Building Society, which gives mortgages to teachers on fixed-term contracts as long as their contracts are likely to be renewed.
Another small building society, the Lambeth, recently developed a mortgage scheme specifically for customers on fixed-term contracts. Applicants have to be professionally qualified and be doing the same kind of work they have done in the past. If they are on a one-year contract they must also show that it has been renewed at least once and has six months still to run.
Larger lenders are often more cautious than their smaller competitors. The National and Provincial, for instance, says it does consider applicants on fixed-term contracts but always looks carefully at each person's employment history and circumstances. It is generally easier if a person on a fixed-term contract is not the only one on the mortgage application or the main source of household income.
"If someone is the first name on the application, his or her chances would be very slim. If he or she has the second income, we would probably take a proportion of that income into consideration," says a spokesman for the society.
The insurance companies that provide mortgage indemnity cover, usually for loans worth more than 75 per cent of a property's value, are at least partly responsible for this cautious attitude towards contract workers.
Certainly, most banks and building societies will favour applicants with a 25 per cent deposit over those looking for 90-100 per cent mortgages.
But with contract work and other flexible working arrangements now common in many employment sectors, some big lenders are becoming more flexible. They include the largest mortgage lender, the Halifax Building Society, which will consider applicants who have been with an employer for a minimum of six months if they can show some evidence of likely future employment.
The second-largest lender, the Abbey National bank, usually asks for a contract lasting a minimum of one year and some evidence that it is likely to be renewed. It recently introduced a "baby break" mortgage enabling mothers to take a repayment "holiday" of up to nine months.
Centrebank, a division of the Bank of Scotland, has gone further than most towards meeting the needs of those without the security of a permanent job.
The bank recently launched a new kind of mortgage, which allows customers to vary their monthly repayments and take repayment holidays of up to six months in any one year. Borrowers can also choose to make the equivalent of 12 monthly payments over 10 months and pay nothing for the remaining two.
People looking for a 100 per cent mortgage under this scheme need to have been in the same job for at least 12 months. Those who have done similar work in the past but with different employers would qualify for loans worth up to 85 per cent of the value of their homes.
"Contract teachers have probably been in the same line of work in previous contracts or previous jobs so we would view them as a good risk," says Centrebank's chief manager, Willy Donald.
When Kathryn and Stephen Smith qualified as teachers and moved to West Yorkshire in 1994, their chances of stepping on to the first rung of the housing ladder looked bleak.
Mortgage lenders shunned them when they said their first teaching jobs were likely to be temporary. "We were taken aback at the speed with which they just said 'no'," says Kathryn.
Most high-street banks and building societies continued to say "no" even when Stephen took a job on a one-year contract and Kathryn found work covering a maternity leave for one term. The first lender to give the couple any hope was the Teachers' Building Society, which was prepared to consider a loan if they both had one-year contracts. Even so, it said it would not lend them as much as it would if one of them had a permanent job.
As it turned out, Stephen's job was made permanent last January. By that time Kathryn had landed a job on a one-year contract, which has now been renewed, and they were able to buy a house with a Teachers' Building Society mortgage.