Complex income is becoming mainstream

For some time, “complex income” has been used as shorthand for the mortgage equivalent of the ‘awkward squad’. These are the cases that take longer, need more explanation, and are usually borrowers who don’t quite fit the vanilla underwriting process of a standard salaried payslip and a neat credit profile.

Complexity, by definition, alludes not to complication (standard lending may be complicated from time to time) but to issues that need judgement, nuance and interpretation. The issue is that what we call complex income is no longer the exception, it is becoming the norm. 

It is worth being clear about what we really mean by the term. In most cases, it simply describes income that is variable, irregular, multi-sourced, or harder to evidence through conventional documentation. That does not mean the borrower earns less. In fact, it often means they earn more. More often than not the person assessing these cases may have only ever been conventionally salaried so increasingly experience and expertise matter. The challenge is not how affordability might be met, but how affordability is assessed by mainstream lending models that were designed many years ago for predictability rather than diversity of income.

To see how this has happened we simply have to look at how the economy has changed over time. ONS survey data suggests that, since the turn of the millennium, the number of self-employed people in the UK has undergone a steady increase from around 3.25 million individuals in 2000 to around 5 million in 2020¹.

The UK labour market has quietly but decisively changed shape and it is a far more profound change than simply growth in self-employment. Skilled-worker visa borrowers may be PAYE, employed by a UK entity and paying UK tax but in practice, they are often navigating probation periods, fixed-term contracts, overseas credit histories, relocation allowances or split jurisdiction remuneration structures. None of this necessarily weakens the case for lending, but it does make the income harder to evidence within a standard traditional affordability framework.

Complex income is increasingly a signal that the way people earn money has evolved faster than the methods and tools traditionally used to assess it. The real challenge and opportunity for lenders is to distinguish between income that is difficult to document and income that is genuinely risky.

Lenders need to work closely with brokers to understand income structures, contextualise any variability and match clients to lenders whose criteria genuinely reflect modern working lives.

We recognise that getting this right is not about stretching criteria; it is about aligning lending decisions with economic reality.

Notes

1. (Office for National Statistics, 2018; Cribb, Miller and Pope, 2019; Giupponi and Xu, 2020).

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