Childcare costs are leaving families unable to buy homes – or even renegotiate existing deals – as banks unfairly weight the cost of nurseries when making their mortgage calculations.
Some desperate families are resorting to methods such as giving family members cash payments in order to claim they pay their childcare for them, lying outright, or hiding pregnancies. Though the Bank of England earlier this year withdrew mortgage affordability checks, nursery charges are being disproportionately taken into account by banks and across whole mortgage terms – even though most parents will only pay for childcare for a few years at the point of application.
Families are instead being trapped in an increasingly inflated and unpredicatable rental market, paying two or three times more than they would on a mortgage, just as a cost of living crisis is hitting.
I know this because it happened to me. After starting to look to purchase a house on calculations based on our deposit and incomes, it hit me like a tonne of bricks when I was told by a mortgage advisor that leading high street banks would give us around a third of what we’d expected (and needed) because of our childcare costs. Just for my own sanity, I asked the advisor to put through a calculation as if we had no childcare costs. The banks would offer hundreds of thousands of pounds more - one more than £250k more. Worse, some quick back-of-envelope maths showed me that essentially, the figures meant that essentially I’d be better off not working.
I took to Twitter not just furious but sure there was a mistake – someone would have the answer. Sadly the huge response I received was just from scores of parents who had found themselves in the same shock. In fact, I later discovered, research by uSwitch claims around 68% of families intentionally hid the cost of childcare during their mortgage application process. If you want a complete headache, it's worth reading the scores of replies from people in the same situation as us, who responded.
‘We recently lied on our mortgage application about what our childcare costs will be when I return to work otherwise there’s just no way we’d have got our mortgage,’ one parent DM'd me.
‘My mother-in-law offered us a gift of £50k towards a deposit on a new house,’ another told me in private. ‘We weighed it up and it worked out cheaper for her to pay our childcare bills for the next two years because then we could tell our lender we had no childcare bills and borrow more than £100,000 more. We could never have bought a home with the limited borrowing declaring our childcare would’ve meant.’ Another added: ‘Our mortgage advisor told us to say that a grandparent (in this case my mum) paid nursery fees for us.’
I should add this was before Liz Truss and Kwasi Kwarteng sent the entire mortgage market into an insane spiral that’s made mortgages even more of an impossible dream for most normal people. But even before that, you might be reading this thinking that, fair enough, banks have a responsibility to steer us away from a financial crisis and make sure people can afford their mortgages.
But what I (and so many I spoke to) found so frustrating was the unfairness of the banks’ calculations which seem to be based on huge multiplications. The banks also took no other costs into consideration except childcare and a monthly car lease payment. There was no question or interrogation of any other outgoings.
I did the maths I’ve never wanted to do and worked out exactly how much childcare was actually going to cost me from that point on. Again, the bank didn’t ask that, or how old my children were – they just chose a current monthly payment and multiplied it in an algorithm I’ve found completely impossible to unpick (believe me, I’ve tried).
With various arrangements, my childcare bill for the next four years (after which, both my children will be in school) will be £46,800. So why, when I can very quickly (though painfully) work all that out, was a bank claiming that they were penalising me by hundreds of thousands more across a 30-year term, for a cost of £46,800?
Why did no-one interrogate anything else, like if I had an insane champagne and truffles addiction? Why, for instance, didn’t they consider the government tax breaks I can get on that cost (minimal, but something at least)? And why, in 2022, did the banks' maths mean that if I stayed at home and looked after my children full-time, would we be more likely to be able to afford a home?
And of course, the age-old question that all renters want to scream into the void of their emptied bank accounts: Why could a bank see that I could afford an exorbitant rental payment from my bank statements, yet claim I wouldn’t be able to pay much less than that, in a mortgage, to them?
I had to make sure I wasn't present when the surveyor came because she would see me pregnant.'
Most of the women I spoke to who flooded my DMs didn’t want to be named – not only is there a perceived shame around the issue, as if you can’t provide what your children need, but many had resorted to fraudulent means (or at the very least bending the rules) to get a mortgage instead.
Another woman told me that as the breadwinner, she fixed her mortgage as soon as she discovered she was pregnant. ‘I had to make sure I wasn’t present when the surveyor came around because she would see me pregnant and I worried she would tell the mortgage company,’ she said. ‘My husband and I then split up. I was paying the mortgage myself but he needed his money from the house - I would keep the house and this meant remortgaging. There was no way I would have been able to do that with childcare fees of £1k a month on a single person salary, despite the fact I was able to meet the mortgage payments. They would have loaned me half of my current mortgage so it would have had to remain in joint names meaning husband couldn’t move on and could have made my life difficult.
‘In the end, my Dad paid my childcare and I would pay him in cash as and when. That way I wasn’t responsible for the childcare costs and was able to buy my husband out.’
One parent told me that if they try to fix their mortgage while paying childcare, banks will deny this and instead they end up on expensive, variable rates.
‘My partner and I are porting our mortgage from one house to another, not even borrowing any more money for it,’ another mother told me. ‘But we had to declare in our assessment for the mortgage application that we would cancel our childcare (two days) entirely in order to help pay the mortgage if need be. It was not just a casual "that’s an option" discussion, it was the mortgage team saying "you’ve agreed to this, it is now written in your case notes" situation.’
Another family managed to get a mortgage during covid and so were able to claim they had no childcare fees at the time – and didn’t report a change of circumstances when nurseries reopened. ‘My mortgage is now £650 a month, rather than £1,650 per month in rent,’ they said.
For many though, they’ve had to give up on the idea of owning a home until their kids go to school – even though they might have two decent full time incomes – and are instead left in an unsettling rental market. I myself know this to be an issue – just as we were about to start applications for my son’s school, our landlord made us leave their property way ahead of our agreed term and threw us into a rental market where prices have inflated by around £400/month in the area.
One mum told me: ‘I live in a top floor flat, with twin boys (one with a disability) and our childcare bills are so high we couldn’t get a big enough mortgage to get a house anywhere within commute of our jobs. It’s a nightmare as I really struggle to get in and out so rarely leave my home.’ Another said: ‘We’ve put off moving again for another year – after trying for the last two years – as we can’t get a mortgage with the childcare costs of three-year-old twins.’