Tuesday, May 26, 2015

A family or a house – your choice

Pregnant women 'unfairly' denied mortgages over child costs

It is sensible for banks to look at mortgagees costs but under the UK's tax system whereby single income households are taxed at a much higher rate than dual income ones, more and more couples have to choose between having children or ever owning a home. The only way to escape single income punitive rates is to become a contractor under a limited company and distribute dividends to the non-working spouse, but this just about rules you out for a mortgage anyway. Quite a few people who I worked with have done this, but they all have lots of home equity and/or long fixed rates so can sit and chomp down the mortgage. After a few years of contracting banks will look at you again, but with caution as they don't have a permanent pay cheque to trouser.

Posted by mombers @ 02:48 PM (5240 views)
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2 thoughts on “A family or a house – your choice

  • Noallegiance says:

    Erm.

    This is just a symptom of how unaffordable housing is. Lambast banks when they dish out credit too easy and lambast them when they do the maths and think that maybe they wont get their money back.

    This is actually a good thing.

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  • The question is why are banks looking into stuff like that at all when they should just be lending less to all couples under the age of 40, on the assumption that all of them will probably eventually have kids.

    I remember shortly after I had a kid realising that I could borrow much less than a couple I knew who earned less than us. Granted, having a kid means having much less money coming in, but who’s to say they weren’t pregnant anyway? They were at a similar stage of life, as it happened, just a year behind us.

    It’s not as if our plans ever changed. It’s just that our headline joint income dropped and our outgoings increased in a completely expected and entirely predictable way. Suddenly, the banks will only lend you 60% of what they used to.

    They should just lend to every childless couple on the assumption that they’re effectively about to have only one full-time salary for the next 5-10 years.

    The only reason their current approach hasn’t proven disastrous is that rates have kept dropping and HPs have kept rising, so that people are able to remortgage onto fixed-rate deals they can afford even once they have kids. I suspect this is why there were so many trapped second-steppers until the recent boom. They weren’t able to borrow as much as when they were FTBs as they had had kids.

    MMR seems to have only compounded this issue by looking at people’s outgoings more.

    It’s not healthy for affluent professional people to be structuring their family planning around their access to mortgage funding in this way.

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