Families penalised by mortgage lenders

Homeowners across the country will have their own worries about losing their home but for couples with children the fear is even greater. But as mortgage lenders continue to tighten their criteria for borrowers, it is families who are the worst affected.

Families being penalised by mortgage lenders
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According to the Financial Services Authority's post-recession review of the market, banks and building societies are now offering families smaller mortgages than those without children, with many experiencing a reduction of between 10 and 20 per cent.

For example, The Telegraph reports that a childless couple both earning £25,000 could expect a mortgage offer of £201,687 from Santander - a couple with two children with an identical credit rating would receive only £179,852. And that figure is further reduced for those with four children.

A similar scenario can be seen across mortgage lending as dependants are now taken into account as part of the application process.

Carol Begbie of mortgage broker Female Independent, told the paper: "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.

"Not is does and this is becoming a significant problem. It is absolutely unfair to penalise people with children by reducing their capacity to borrow compared with a single person or a childless couple."

Parents applying for a mortgage or remortgage can now expect to be quizzed on school fees, childcare costs and lifestyle expenditure.

But many mortgage brokers have pointed out potential flaws in these new lending criteria - for instance, only children under the age of 18 will prompt lenders to offer a reduced loan, while those with university age youngsters are likely forking out much more cash as a result.

Mark Harris, managing director of Savills Private Finance, added: "It is all a bit of nonsense. People live their lives quite differently. Couples with children stay at home every evening because they can't go out. Does this really mean they spend more than childless couples who are out every night, and take several foreign holidays a year?"

It is bad news for families looking to weather the storm by switching to a more competitive fixed-rate deal.

David Hollingworth, from London & Country Mortgages, added: "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."

What do you think? Are mortgage lenders wrong to penalise families or is it only fair to factor in the cost of raising children? Leave your comments below...