Mortgage lenders 'must take into account circumstances of the borrower'

One in six families who have applied for a mortgage in the last 10 years say they have been offered a smaller loan or even rejected because of their childcare costs.

When asked if they believed they were turned down for a mortgage or offered a smaller loan than expected because of the cost of childcare, 17% of people surveyed for website uSwitch.com claimed they knew they had been.

Stricter mortgage rules introduced in recent years under the mortgage market review (MMR) mean many lenders take childcare costs into consideration as part of weighing up whether to grant a mortgage applicant a loan.

The rules were introduced to make sure borrowers could truly afford to repay their mortgages, even if interest rates were to rise, and ensure they were not just pinning their hopes on house prices going up.

More than two-thirds (68%) of those who believed they had been turned down for a mortgage or offered a smaller loan than expected because of the cost of childcare said they had tried at some point to hide the true cost of their childcare in an attempt to secure a better deal.

Some had relied on grandparents or friends to help to look after children to temporarily reduce their childcare outgoings while applying for a home loan.

uSwitch.com also said it found evidence of inconsistencies between lenders and the questions they ask to determine an applicant's eligibility.

More than two-fifths (41%) of families surveyed said their lender did not ask or take into consideration the ages of their children, to find out if costs may reduce in the near future. It said only 39% of families surveyed were asked how their childcare costs may change as their children got older.

Tashema Jackson, a money expert at uSwitch.com, said: "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."

Some 1,000 parents with children 12 and under who have applied for a mortgage in the last 10 years took part in the uSwitch research.

A recent report from the Organisation for Economic Co-operation and Development (OECD) found couples in the UK spend around one third of their income on childcare costs.

A spokesman for the Council of Mortgage Lenders (CML) said: "The mortgage market review means that 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."