The mortgage cliff panic may already have blown over, but there’s another group of Aussies facing a continuous uphill battle on their homeownership journey: gig economy workers.
With the homeownership journey already a stressful one for many, particularly self-employed workers, gig economy workers are becoming Australia’s “invisible problem”, and it’s a problem home loan provider Rate Money wants the industry to fix.
“The gig economy is something we can’t turn away from. With rising interest rates and the cost-of-living crisis worsening, people are going out and getting second jobs,” said Rate Money CEO Ryan Gair (pictured above).
“Many people are stuck in their financial situations because lenders have not caught up to where the gig economy is at and where it’s heading.”
The gig economy has grown rapidly in recent years, thanks in part to the rise of online platforms and apps that connect workers with customers.
From ride-sharing drivers and food delivery workers to contractors and freelancers, these roles have become essential within a digitalised and evolving economy.
Now approximately 250,000 Australians are part of the gig economy – including many who consider it a “side hustle” on top of a regular job – and new research found they tend to be more stressed than other types of workers.
Gair said these workers lack financial security because they face problems with paperwork and proof of income when purchasing property.
“The invisible problem for gig economy workers getting home loans is that lenders don't recognise their income as easily as they do for traditional employees,” said Gair.
Lenders often don't accept gig economy income within their guidelines, or they only use a portion of it when calculating how much money someone can borrow. This is a problem for gig workers and freelancers, who may have trouble getting or refinancing a mortgage.
For example, some lenders may require freelancers to be self-employed for two years before they will give them a loan.
“This can be a long time to wait, and it can make it difficult for people to buy or refinance a home. It certainly is not helping customers today and it could even worsen their financial situation because of a lack of options,” said Gair.
With the gig economy blowing up during the pandemic with over 100,000 new ABNs registered and with the recent cost of living crisis, Gair said this situation is only going to get worse if lenders don’t change their guidelines.
“Lenders need to start recognising gig economy income and using it as servicing in a shorter space of time,” Gair said.
From the lenders’ perspective, there is good reason to be risk-averse when it comes to workers in the gig economy.
These incomes are notoriously turbulent, and they want to be sure that the worker has a consistent income and that they can afford to repay the loan.
However, Gair said Rate Money’s product caters to this often-neglected segment of the job market while still ensuring it manages risk.
Developed during the pandemic, the Think Money product line – which has recently cut clawbacks and removed valuation and application fees - caters for gig economy workers with two years of experience in the industry.
This allows gig economy workers to get a loan after only three months of being self-employed, even if they are switching from a PAYG job in the same industry. Other lenders typically require at least 12 months of self-employment before approving a loan.
“We still want to do prudent lending,” said Gair. “If you’re a mechanic for example and moved into real estate, we would still consider that under that normal lending guidelines because you are changing industries, and we need to make sure you are successful in that industry.”
“But if you are in the car rental industry and then you became an Uber driver, after three months we will treat you under normal guidelines.”
Better yet, Gair said Rate Money would treat these clients as a prime borrower.
“We’re not putting on risk fees or loaded rates or anything like that. We believe these people moving to self-employed are doing so to better their careers and incomes,” Gair said.
“Even if their freelance self-employed work doesn’t work out, they will be able to move into a PAYG employed role within the same industry if needed.”
With the cost-of-living crisis intensifying and homeownership becoming increasingly unattainable for many, Gair said there is a need for a consistent industry-wide approach to gig economy workers and the paperwork required.
“The gig economy is the future. From truck drivers, NDIS workers, IT experts and app developers, we need to give these Australians a chance at the dream of homeownership within a reasonable timeframe.”
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