Short shrift for short contracts: Fixed-term jobs can cause mortgage problems, writes Sue Fieldman

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People on fixed-term employment contracts can have problems when they want a mortgage.

Short-term contracts have become much more common, particularly among high-flying managers and in local government.

Owen Davies, spokesman for the trade union Unison, which covers local government employees, says that many local authorities are in turmoil, not knowing whether they will disappear in re-organisations. Coupled with the general restrictions on spending, short-term contracts are increasingly common.

'Fixed-term contracts usually only apply to the top jobs with the top salaries offering enough money to make people take the risk of losing their security,' Mr Davies said. 'We do not advise people to take fixed-term contracts but they may not have a choice.'

Trade union members should check whether their union has a special mortgage arrangement.

A spokesman for Halifax Building Society said: 'A short-term contract raises the question, at the end of the contract what happens to the income? We would have to see confirmation from an employer of the nature of the employment and if the contract is likely to be renewed.'

Whether an employer is prepared to put pen to paper to confirm that a short-term contract will be renewed is a moot point.

Abbey National says that if there is more than two years to run on the contract there is no problem.

An Abbey spokesman added: 'If there is less than two years then we will have to look at the situation in slightly more detail. We look at the company and see whether it has renewed the contract in the past'.

Cheltenham & Gloucester Building Society looks at borrowers' employment records and prospects for the future.

A C&G spokesman said that there is usually no problem with short-term contracts in the public sector, medicine, the law or education. However, other occupations such as the media 'may not be looked on as favourably'.

Barclays Bank has no separate policy for employees on fixed-term contracts as everyone 'is judged on their individual merits'.

A spokesman said that people have to show an ability to repay. 'Even if they are on a fixed-term contract for one year they may have capital put aside to use to repay.'

Lenders will have to be convinced that the borrower really is employed on a contract and is not self-employed. If they decide you are self-employed, your problems may have only just begun.

The moral of the story is that people who are on a fixed-term contract and thinking of moving should check now what the mortgage situation will be. Otherwise they could find that the short-term contract may cause a long-term financial headache.

(Photograph omitted)

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