Last reviewed: June 2026
TL;DR- The day rate method calculates annualised income as day rate x 5 x 46 (or 48) weeks, bypassing the need for two years of accounts.
- Lenders using the day rate method require the current contract, evidence of contract history and bank statements confirming income received.
- Day rate assessment typically produces a higher assessable income than the accounts method for contractors who retain profits in a limited company.
- Not all lenders offer the day rate method - a specialist contractor mortgage broker is the most effective way to access these products.
The Day Rate Calculation
The day rate method is an income assessment approach used by a subset of mortgage lenders for contractors who charge clients a daily or hourly rate. Rather than relying on tax returns and accounts to determine income, the lender calculates an annualised income figure directly from the contractor's current contract rate. The standard calculation is: day rate x 5 (days per week) x 46 weeks (allowing for holiday, sick leave and gaps between contracts). Some lenders use 48 weeks.
A contractor billing at £600 per day would have an annualised income of £600 x 5 x 46 = £138,000 under this method. This income figure is then used in the standard loan-to-income calculation to determine the maximum mortgage available. For contractors with high day rates who draw relatively modest salaries and dividends from their limited company, the day rate method typically produces a materially higher maximum loan than the accounts-based method.
Which Lenders Use the Day Rate Method
The day rate method is not universal. It is offered by a subset of lenders - typically specialist or building society lenders that have developed contractor-specific underwriting criteria. Mainstream high street lenders generally use the standard self-employed (accounts-based) approach for contractors who operate through limited companies.
The lenders offering day rate assessment, their specific criteria and their current rates change with market conditions. A whole-of-market mortgage broker with specialist contractor experience maintains up-to-date knowledge of which lenders currently offer this approach and what their precise requirements are.
Eligibility Requirements for Day Rate Assessment
Lenders using the day rate method typically require:
- A current contract specifying the day rate and the contract end date.
- Minimum remaining contract term of 4-6 weeks at the point of mortgage application.
- A history of contracting in the same field - typically evidenced by the last two or three contracts or a minimum of 12-24 months of contracting history.
- Bank statements (personal and/or business) confirming the contract income has been received.
- For limited company contractors: evidence that the company is trading and that the applicant is the director and principal shareholder.
Contract Gaps and Renewals
Gaps between contracts are a common feature of contracting and most contractor-friendly lenders accept short gaps, particularly where there is a strong track record of renewal in the same specialism. Lenders typically want to see that the contractor has not been out of work for extended periods and that contract renewal is a realistic prospect at the current day rate.
Where a contractor is between contracts at the time of application, some lenders will consider the application where a new contract has been signed or is imminent, evidenced by a signed contract or heads of terms. Lenders vary on whether they will proceed without a live contract in place.
Frequently Asked Questions
Does the day rate method apply to hourly rate contractors?
Yes. Some lenders extend the same principle to hourly rate contractors, calculating annualised income from the hourly rate multiplied by standard working hours and weeks. The specific calculation varies by lender. The same documentation requirements apply - a current contract showing the rate, history of contracting and bank statements confirming income received.
What if my day rate varies between contracts?
Most lenders using the day rate method base the calculation on the current contract rate rather than an average of historic rates. If the current rate is higher than historic rates, this is beneficial. If the current rate is lower - for example, after taking a lower-rate contract in a different field - the assessable income will be based on the current lower rate. The historic rates are used primarily to verify the track record of contracting, not to calculate assessable income.
Can I use the day rate method and accounts together?
Not typically. A lender will use either the day rate method or the accounts method, not both simultaneously. A broker may identify different lenders using each method and compare the outcomes to determine which produces the best result for a specific contractor's circumstances.
Are day rate contractors treated differently for buy-to-let mortgages?
Buy-to-let mortgage affordability is assessed primarily on rental income coverage rather than personal income, so the day rate vs accounts distinction is less significant for BTL purchases. However, lenders that require a minimum personal income as a condition of BTL lending may accept either method to verify that income threshold. Specific lender criteria for BTL and contractor income should be checked.
