One in six families struggling to get a mortgage because of childcare costs

Posted 19 October 2016 by Nick Parkhouse

The spiralling expense of childcare is affecting the mortgage availability for many family homebuyers, according to new research from uSwitch...

New research has revealed that the cost of childcare is preventing thousands of families from getting the mortgage that they need. A survey of 1,000 parents with children aged 12 and under, and who had applied for a mortgage in the last decade, found that 17% struggled to get a mortgage because of childcare costs.

Changes to mortgage affordability rules introduced two years ago required lenders to more carefully assess a borrower's income and outgoings when underwriting a mortgage.

Childcare costs and other regular outgoings are now taken into greater consideration when agreeing a home loan, and families are finding that these costs are standing in the way of them getting the mortgage that they need. This has particularly affected families recently as the Daily Telegraph reports that childcare costs have risen by 38% in the past five years.

Research from a leading price comparison sure has found that one in six people were either turned down for a mortgage or told they could borrow less than they needed because of the amount they were spending on childcare.

Mortgage applicants 'hiding' the cost of childcare

The survey from uSwitch also found that two thirds of families had tried to 'hide' the cost of their childcare in the run-up to applying for a new mortgage. Three in ten people asked grandparents to look after their children in order to make their finances look better for a lender, while over a quarter (27%) relied on friends to look after their children after school.

Applicants also blame mortgage companies for “not using a commonsense approach” in the application process. Two fifths of families said that their lender did not take into account the fact that childcare costs would fall in the near future, for example when their child reached the age of three and qualified for free government childcare.

Tashema Jackson, money expert at uSwitch, says: “Parents are being stung with a financial double whammy. Not only are they having to cope with sky-high childcare costs, but this burden is also impacting their ability to secure the best mortgage deal. 

“While lenders have a responsibility to make sure people only borrow within their means and can afford future repayments, they also need to reassure homebuyers that their whole financial picture is being considered.”

The Council of Mortgage Lenders (CML), which represents banks, building societies and other lenders, says: "Lenders must take into account all the key financial commitments of borrowers. That could mean that those who have to pay for childcare may not be able to borrow as much as others with a similar income who do not have these commitments. The aim is to try to ensure that every mortgage is affordable, taking into account the circumstances of the borrower."

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