finance

Could hybrid working make or break your finances?


They used to say that if you’re tired of London, you’re tired of life. Yet the number of my friends and colleagues who have left (or plan to leave) the capital gets longer by the day.

Last weekend, I went to stay with some journalist friends who traded in their Islington town house for a huge detached house in Sussex. Their kitchen is bigger than my entire flat in Hackney. They each have their own office, and a huge outdoor space to entertain their envious city-dwelling friends. Hmmm.

If I traded in my two-bed flat in Zone 2, I could easily afford a four-bedroom house nearby with a garden and garage approximately 20 minutes’ walk from a mainline station.

The extra space is tempting, but would sadly involve a 90-minute door-to-door schlep to the FT’s office. Yet if I embraced “hybrid working”, I might only have to make this journey once or twice a week (or less).

There’s mounting evidence that other capital dwellers are thinking along the same lines — but I’d encourage deserters to think carefully about the pros and cons for their personal finances.

Property portal Zoopla published data this week — dubbing it the “search for space” — showing that demand for family homes across the UK has risen by 114 per cent during the pandemic, far outstripping demand for flats.

The further out you go, the more indoor and outdoor space you will get for your money. Accordingly, Zoopla found demand for property in outer London was running 86 per cent ahead of pre-pandemic levels.

However, demand for inner London flats has barely budged. It’s a good thing I’m happy staying put, as my charming, but compact, 1970s maisonette might not fetch as much as I’d like.

Nationally, Zoopla says average prices of flats have only risen 1.4 per cent in the past year, compared to 7.3 per cent for houses.

There’s also evidence that the relocation trend extends far outside London and the Southeast. Annual price growth for houses is highest in Wales (10.2 per cent, the strongest level for 16 years) and north-west England is not far behind at 8.8 per cent.

Surging prices haven’t deterred Grace, an FT reader in her late 30s, who hopes that hybrid working will enable her to sell up in Walthamstow and move back to Manchester.

Pregnant with her first child, she’s not just in need of extra space — being closer to family members and avoiding the high cost of childcare in the capital are two very obvious financial benefits. Plus, she could potentially shrink the size of her mortgage.

A data analyst, both Grace and her partner have worked from home throughout the pandemic and hope to continue, but have yet to make a formal request to their employers. They also wondered what questions mortgage lenders might ask them.

Andrew Montlake, managing director at mortgage broker Coreco, has noticed many clients working in professional services shifting to Norfolk, Suffolk and Sussex on the basis that they’ll only come into London when needed.

More affluent remote workers could consider Devon and Cornwall.

“Lenders are having to rethink how they look at the plausibility of these kinds of extended commutes,” he says.

Pre-Covid, lenders might have questioned the travel costs, time constraints and risk of your salary dropping if you had to seek employment closer to home — but flexible working has changed all this.

If the distance between your workplace and new home is rather extreme (like the Manchester example) Montlake says a good broker will make use of the “notes” section on the application form to pre-empt lenders’ questions and explain homeworking arrangements.

Otherwise, mortgage underwriters might think about factoring in the cost of lengthy commutes or overnight stays into affordability assessments, and could even pause applications to request more information.

Rosie Fish, a mortgage broker at Habito, says that although the issue of relocation is currently a hot topic, she has yet to see a lender refuse an application because of it.

“If your occupation is one that’s obviously possible to perform remotely, they may not query it at all,” she says. However, this could change in future if employers order workers back to the office en masse.

“If relocation becomes a known problem, underwriters may start to question it — but it’s not a problem yet.”

In some cases, buyers might be asked to supply written evidence from their employer that they can continue to work from home (or mostly from home) in future.

This could be a tricky question to ask the boss. Risk relocating on the sly, however, and there could be damaging financial consequences, warns Jessica Chivers, founder of the Talent Keepers consultancy.

“You have to consider what that could do for the trust that exists between you and the people who hold influence over your pay, progression and projects you’re working on,” she says.

Check the terms of your contract, be prepared to justify your motivation for the move and the practicalities of how you could make it work — perhaps two days per week in the office, and one night in an Airbnb.

“Show you’ve given this serious thought, and that your commitment remains as strong as ever,” she advises. “What I’d say to employers is that this is going to be on the minds of your people right now. There’s a case for being proactive and asking people thinking about making significant life changes to come forward and share their ideas.”

Even if you relocate with your company’s blessing, remote workers with lower living costs could find future pay rises and bonuses are less generous. There could also be consequences for career progression, but this is a risk Grace is prepared to take.

Her next worry? Telling mortgage lenders that she is pregnant.

Mortgage application forms have a catch-all question asking if there are any circumstances that may affect your ability to repay a mortgage in future. Maternity leave is one of these, but Fish emphasises that it’s still possible to obtain a loan.

A carefully prepared application will maximise your chances of passing affordability tests. The crucial fact is when you intend to return to full-time work — and a full-time salary. Again, a letter from your employer confirming your intentions and salary could open doors.

If, like me, you plan on staying in London are there any financial advantages for us? Don’t forget the tax benefits of the government’s Rent a Room scheme. You can make £7,500 per year tax free from letting rooms in your house to overnight guests — and I predict there could soon be high demand for weeknight stopovers in the capital.

Claer Barrett is the FT’s consumer editor: claer.barrett@ft.com; Twitter @Claerb; Instagram @Claerb





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