Families facing rising childcare costs and the withdrawal of child benefit could also find it harder to get the mortgage they need in the next few years. Mortgage experts have warned families that more stringent mortgage affordability checks are likely to reduce the size of loans that borrowers can take out, perhaps by as much as 75%.
Changes to the way that mortgages are agreed may have an impact on many homeowners looking to move home or remortgage when their deal ends, according to the Daily Telegraph.
Couples with a child may seen their borrowing potential fall by 75%
New figures from the insurer LV have found that childcare costs have risen sharply in recent years. They now average £63,738 per child, compared with £39,613 a decade ago. And, as the Daily Telegraph reports, "apart from coping with this cost, it increasingly hampers families' ability to borrow."
"New rules governing how mortgages are agreed are likely to have an impact on many families," says Keith Osborne, editor of whathouse.co.uk. "Lenders are tightening their affordability criteria and now borrowers have to demonstrate that they can afford a mortgage. Many lenders are taking childcare costs into account when determining the level of mortgage they will agree and this has resulted in many banks and building societies restricting the amount they will lend to new borrowers."
The newspaper warns that "the impact of the cost of bringing up children on your home loan application should not be underestimated" and cites an example from HSBC. If you're a couple without children and you each earn £25,000 you might be offered a mortgage of £224,000 by the high street lender. However, if you are in identical circumstances but you have a child and you pay monthly childcare costs of £1,000 you might receive a loan of £65,000 - nearly 75% less.
The Yorkshire Building Society would offer a childless couple £227,961, compared with just £53,869 if they had one child in childcare, a difference of 76%.
An HSBC spokesperson said: "We don't treat families, couples or single customers any differently; affordability is the key. As a responsible lender we need to ensure that customers are able to meet their repayments."
"If you're thinking of having children then it may make sense to consider buying your new home or remortgaging before this event," says Osborne. "If you don't, you could find your borrowing potential significantly falls, unless of course you are relying on unpaid childcare such as friends or family. As the Telegraph advises, shopping around is vital and a good mortgage broker can help you maximise your borrowing potential."
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