Banks penalising families and approving only small mortgages


Families are failing to qualify for the same mortgage than couples without children despite identical earnings.

Banks are creating problems for families by only approving small mortgages.

Mortgage lenders have reduced the amount that families can borrow under tighter affordability criteria.

The move means that couples without children can borrow more than families with children even though they may bring in the same amount of earnings each month.

Some banks have reduced the amount that they lend out to families by 10% with others implementing a reduction of nearly 20%.

Carol Begbie, of mortgage broker Female Independent, said: “Lenders have always asked about dependants when assessing the ability of applicants to repay a loan. But having children didn’t actually reduce the amount you could borrow. Now it does and this is becoming a significant problem”.

She added: “It is absolutely unfair to penalise people with children by reducing their capacity to borrow compared with a single person or a childless couple”.

Statistics show that a couple with no children who both earn £25,000 could be offered £201,687 from Spanish bank Santander when applying for a mortgage. However, a couple with the same credit score who have two children would only qualify for £179,852.

Similarly a couple without children could borrow £215,000 from Halifax where as a couple with children could borrow just £195,000.

David Hollingworth of London & Country Mortgages said: “There is no doubt affordability is now being judged much more tightly, which manifests itself more onerously for some borrowers than for others. Children cost money and this is now being factored in. This will make borrowing tougher for them than only a couple of years ago, which will, in turn, hinder the options parents now find open to them when they come to remortgage or move”.

A spokesman for the Council of Mortgage Lenders said that the lending process has had to become more sophisticated as a result of the change in regulatory requirements.