Childcare costs derailing one in six family mortgage applications

One in six families have been refused a mortgage or told to borrow less due to how much they spend on childcare, leading many to skew their outgoings in a bid to trick lenders.

Research commissioned by uSwitch.com surveyed 1,000 parents with children aged 12 or under, who had applied for a mortgage in the past ten years.

From that sample, 17 per cent said that childcare costs had derailed their mortgage application while more than two-thirds (68 per cent) of those admitted to intentionally hiding the true cost of the childcare during the application process.

Three in ten resorted to free childcare by asking the grandparents to look after their kids instead of a minder, while around a quarter reduced their working hours to shrink their outgoings or asked friends to pick up their kids from nursery or school.

Childcare costs have risen 38 per cent in the past five years, while the average UK salary has increased by just 1.14 per cent.

Age frustration

The research also reveals inconsistencies between lenders and the questions asked to determine an applicant’s eligibility.

Two in five (41 per cent) of families said their lender didn’t ask or take into consideration the ages of their children to decipher if costs may reduce in the near future.

Childcare costs can drop by up to half between the ages of two and three, when the government’s free childcare scheme takes effect, but only 39 per cent were asked how their childcare costs may change as their children got older.

Price comparison website uSwitch called on banks to consider the age of the family’s children when deciding the affordability of a mortgage.

Tashema Jackson, the site’s money expert, said that the willingness of some parents to conceal the true picture of their finances was concerning, and doing so may have a severe impact on their ability to afford repayments down the line.

“Parents are being stung with a financial double whammy,” she commented. “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 should ensure people only borrow within their means, they also need take into account the applicant’s whole financial picture, concluded Ms Jackson.

By Amy White