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One is six families penalised by mortgage lenders over childcare

  • One in six families have been offered a smaller mortgage because of childcare costs – or have even been rejected

  • Two thirds (68%) of the families affected intentionally hid the true cost of their childcare during the application process

  • Three in ten (30%) resorted to asking grandparents for free childcare and nearly a quarter 23% reduced their working hours to make their outgoings look smaller

  • Concealing the true cost of childcare from lenders has caused six in ten (60%) parents to experience high levels of stress and anxiety.

One in six families (17%) who have applied for a mortgage in the last ten years say they’ve been turned down or offered a lower loan because of their childcare costs, according to Uswitch.com, the price comparison site and switching service.

Following the Mortgage Market Review in April 2014 and the introduction of stricter mortgage eligibility criteria, many lenders now take childcare costs into consideration as part of their affordability assessment. But, as childcare costs have risen 38% in the past five years, more than two thirds (68%) of the families affected say they have had to hide the true cost from lenders in an attempt to secure a better deal.

In a bid to reduce monthly spending leading up to their mortgage application, parents have resorted to several different tactics to temporarily reduce their childcare outgoings. Three in ten (30%) relied on grandparents for free childcare, over a quarter (27%) asked friends to pick up kids from nursery or school and just under a quarter (23%) reduced their working hours.

Of those parents confessing to reducing their childcare costs during the application process, over half (56%) did so as they were worried the extra expenditure would prevent them from securing the best rates, while 48% feared their application would be rejected altogether. Unfortunately, however, these actions have had a significant emotional impact: six in ten (60%) parents experienced high levels of anxiety and nearly half (48%) say it caused arguments in their relationship.

The Uswitch.com research also reveals inconsistencies between lenders and the questions they ask to determine an applicant’s eligibility. More than two fifths (41%) of families said their lender didn’t ask or take into consideration the ages of their children, to find out if costs may reduce in the near future . And only 39% of families were asked how their childcare costs may change as their children got older.

Childcare costs can drop by up to half between the ages two and three, when the government’s free childcare scheme kicks in. Uswitch believes that all banks should take this into account when deciding the affordability of a mortgage, by considering the age of children during the application process.

Tashema Jackson, money expert at Uswitch.com, 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. It’s worrying that many feel under pressure to conceal these costs during the mortgage application process, as this may have a severe impact on their ability to meet repayments in future.

“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. Taking into account the ages of children during the application process will help reassure mortgage applicants that they are not being unfairly penalised for costs which are relatively short term.”

Find out how you could save over £1,000 a year with Uswitch here.

FOR MORE INFORMATION

Rory Stoves
Phone: 020 3872 5613
Email: rory.stoves@uswitch.com
Twitter: @UswitchPR

Notes to editors

All research referred to was conducted online by Censuswide between 1st and 7th September 2016, among 1,000 parents with children 12 and under who have applied for a mortgage in the last ten years.

  1. When asked ‘Do you believe that you have been turned down for a mortgage, or been offered a smaller loan than expected, because of the cost of childcare?’, 17% said ‘I know I have been turned down or offered a smaller loan than expected.’

  2. When asked ‘Have you ever hidden the true extent of your childcare costs from a mortgage lender? 68% replied ‘Yes’.

  3. When asked Have you ever hidden the true extent of your childcare costs from a mortgage lender? (Tick all that apply) 30% said ‘Yes, I asked grandparents to look after the children in the months leading up to my mortgage application to reduce my monthly outgoings’, 27% said ‘Yes, I asked friends to look after the children / pick them up from school in the months leading up to my mortgage application to reduce my monthly outgoings’ and 23% said ‘Yes, I reduced my hours at work to look after my children in the months leading up to my mortgage application to reduce my monthly outgoings’.

  4. When asked ‘When you hid your childcare costs from a mortgage lender, what impact did this have on you emotionally? (Tick all that apply) 59.50% said ‘they felt stressed and anxious’. 47.8% said ‘it caused unnecessary arguments with their partner.

  5. Family and Childcare Trust, Childcare Survey 2016

  6. When asked ‘What were the reasons for doing this ? (Tick all that apply)’ 56% said ‘I was worried it would affect my ability to get the best mortgage deal’, 48% said ‘I was worried I would be rejected for a mortgage’.

  7. When asked ‘When you hid your childcare costs from a mortgage lender, what impact did this have on you emotionally? (Tick all that apply)’, 60% said ‘I felt stressed and anxious’ and 48% said ‘It caused unnecessary arguments with my partner’.

  8. When asked ‘During the application process, did your mortgage lender ask how your childcare arrangements might change in the future / when your children were older?’, 39% said ‘Yes’.

  9. https://www.gov.uk/help-with-childcare-costs/free-childcare-and-education-for-2-to-4-year-olds

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