Mortgage lenders discriminating due to maternity leave?

[WillowandWren]

I don’t really know where to start with this. We’re feeling pretty bruised from our experiences so please be gentle. In 2020 I went on my first maternity leave from my full-time job. Prior to maternity leave I had just re-qualified and been promoted so made around £51k. After my maternity leave I went back to work part time and brought in £26k. In 2022 I got pregnant again and with multiple interest rate rises and mortgages going insane, we crunching some numbers and realising our mortgage was coming up for renewal in 2023, we decided we had to move to create a better life/work balance and allow me to continue to be part time to look after our kids.

In Jan 2023 we sold our house on outskirts of London for £380k and moved to be closer to my family in a much cheaper part of the country. My partner got transferred with his company and his fulltime salary is £51k. This is almost double average income for this area. My job is virtual/wfh with occasional trips to london so I plan to return to it after mat leave. Our childcare costs are massively reduced as it’s a cheaper area and also my mum will be having children 2 days per week. We have a deposit of £75-80k and combined salaries of £77k. Initially we were told we could borrow up to £380k with a mortgage in principle so started looking at houses. In March we offered on a place we both loved which cost much lower than this (we needed to borrow £280k) and were advised we should be easily able to port our old mortgage over saving us ERC. However we were point blank refused this and not given an explanation as to why. We got this news when my daughter was 2 days old and the stress it caused was immense. Our mortgage broker was also extremely confused by this decision. This transaction lost us £3000 and weeks of time in the process.

Frustrated and confused, we picked ourselves up again and applied for another lender. We easily passed the initial affordability checks and were told by our broker that it should be a simple process to get the funds we needed. It’s been 5 weeks now and they have made us jump through so many hoops, provide excessive amounts of evidence (nearly all related to my maternity leave and pay) and today we’ve been told that they’re only willing to lend us £255k!!! This is £25k less than we need and applied for. We don’t have this extra money anywhere and are pretty devastated as we will now lose this house and the money spent on surveys and solicitors.

When we’ve looked at the numbers, we’ve basically been offer 5x my partner’s salary. My income seems to have been completely disregarded, even though I have provided numerous bits of evidence stating my salary, terms and conditions as well
as intention to return to work. This smacks of maternity discrimination to me. We have excellent credit ratings, well-paid permanent jobs and a sizeable deposit. We are also trying to buy a house considerably cheaper than the one we just sold. I am seriously worried about what we can do now as our credit ratings have suffered as a result of numerous credit checks and we have lost thousands of pounds only to be in a much worse position than we started. Is there anything I can do to challenge this?

I don't think it's discrimination in the real sense of the word.
You've gone from 1 dependent to 2, which will reduce your borrowing power.
They use all sorts of statistical calculations etc based on childcare costs etc. That's their perogative as a lender.

I think you need to find a new broker to be honest, they don’t seem to be very au fait with the lender criteria. There may be banks willing to lend but the broker should be assessing your circumstances and if necessary checking the likelihood of a successful application. I don’t think it’s maternity discrimination, I think it’s more that having fully assessed your application in detail you are not passing their affordability. If you’re not working currently are you being paid enhanced maternity leave? I think it is correct that some lenders will use your maternity pay as your income and some will disregard it completely. But your broker should know this.

I agree you’re not being discriminated against due to maternity but due to the drop in income the past 3yrs, the fact the you returning to work is an “intention” and they can’t count intended income only actual income, along with as the pp stated your household size has increased by another dependent.

How do you know they’ve offered 5x your partner’s salary and not a different multiple of your joint income?

The salary multiplier is a bit of a quick and dirty measure measure used at mortgage in principle stage. Once you get into full application they will take everything else into an account and make an offer based on affordability rather than pure income.

I don’t think this sounds like maternity discrimination unless you can prove they are ignoring your income.

Thank you for your replies. I absolutely understand the need to base affordability on actual income rather than intended. But maternity leave is surely a very normal and expected dip in income for the majority of families of my age? I also can’t be the only person who has ever applied for a mortgage whilst on maternity leave? I think what grates the most is that it took them over 5 weeks to decide that we actually didn’t meet their criteria and we’ve now thrown away thousands of pounds and lost a house.

I am getting enhanced maternity pay and on full salary for 6 months. My income will obviously dip after that but this will be temporary and I have £15k savings (which I evidenced in application) to make up shortfall during this time. I went back
to work after my last maternity leave due to financial necessity which I imagine most people have to. Also in terms of childcare, our costs will actually decrease because my son will start his free hours in pre-school by the time my daughter starts nursery and my mother will be supporting on other days. I also run an independent practice which brings in an additional £7-8k a year but was told that this not worth counting as I only started it 2 years ago.

I’m not sure what else I can do to prove myself that I’m not a risk to mortgage lenders. I am in a very privileged position so I hate to think what this process must be like for people with less income/savings or single parent families.

Thanks the reply. We know this because that’s the information our broker got from bank. I was really shocked because we were led to believe that it would be based on both our incomes.

I'm really sorry you're having to experience this crap during such a very stressful time.

We were told we could borrow up to 523k. When it came down to it, the maximum we could borrow was 465, and that massively reduced our pool of lenders.

I no longer give Agreements in Principle much serious attention. The range was absurd: 250k - 523k.

• Your broker should have been pre-applying with a decision in principle directly to the lenders which creates a SOFT search and doesn't hit your credit record
• Lenders have DOUBLED the cost of living for all depends on a mortgage; with you off work and a new baby, I assume their algorithms are calculating your husband's salary and three depends - again - at twice the cost of living per dependent than they were using last year

I wish you the best of luck.

If you have additional annual income of 7-8k that would probably make up some of the 25k shortfall in calc, I'd request to use it.

Your broker doesn't sound like they're helping at all, ours went through a couple of applications and could tell us we didn't meet affordability before the full credit check was done.

They cant use your future estimates of 'nursery fees will be this' they use what they are, and income as it is right now.

I'd find another broker

You need a better broker. The advice to ignore £8k self-employed income was bizarre (the cynic in me says that they didn't want to deal with the additional paperwork). Two years of accounts is definitely enough to be considered. I was entirely self-employed when I bought my current house and only had two years of accounts.

I'm not surprised to be honest. Mortgage lenders want facts and evidence - you just saying you'll return after Maternity leave is just that....your word. No guarantees it would ever happen

Also I'm surprised you were offered such a high amount anyway - I don't know many places offering such a high multiplier even if you combine your incomes

Do lenders not take a letter from your employer confirming that you are returning to work and your salary anymore? Mine did when I had to remortgage when I was on statutory maternity pay.

They're not discriminating against you - you're earning much less than you were when you took out the original mortgage.

They don't reduce their offer based on maternity leave - we got our mortgage when I was on maternity leave.

Your broker sounds awful, i hope you aren't paying them and they get their fee from the bank you go with.

They should be doing all the soft checks etc with the various lenders only 1 hard search should be done with the bank who will lend you the money you need.

Your brpker needs to speak to the bank to ask why thry aren't using your salary.

Some banks are much stricter than others

That’s not actually true. When we took out our first mortgage 5 years ago we were both newly qualified and only earning £30k each, £60k total. Our incomes have both gone up significantly. But I understand that the cost of living and banks’ criteria for affordability has changed drastically in that time.

you are still earning less than you were, so they're not discriminating against you personally, which is what you are claiming.

Are you saying they'll only offer £255k total, or on top of your existing mortgage?

In your circumstances I would also hold off spending any money on solicitors or searches and surveys until you have a mortgage offer, I’ve had buyers do this before and it’s a bit of a pain but the market currently isn’t so competitive so I think sellers will wait.

I went back to work after my last maternity leave due to financial necessity which I imagine most people have to.

Have you worked FT since the first maternity leave in 2020? Your OP says you’ve only gone back PT. That’s not really proof of serious intention to go back to work FT after this maternity leave. So don’t blame them for looking at your last 3yrs of PT wages as precarious and not in the same light as a FT salary as they would for a working mother who’d gone on maternity and then back to FT work.

Hi @hettiethehare yes they took all of this information. I have them 6 months’ payslips, my P60, my maternity letter, a separate return to work letter and also a letter from my head of service confirming my terms and conditions (which I thought was excessive).

They didn't with me last year when we applied for a brand new mortgage

Hi @HadalyEve, you’re right, I went back part time and then started working independently around my partner’s hours so we could reduce costs of childcare. Believe me, my decision was not based on a lack of commitment to my career, but rather the extortionate costs of childcare in our area meaning unfortunately it wouldn’t be worth me working FT. I’m not sure how this is relevant to my mortgage application though as I only submitted my part time earnings. And surely anyone could change/lose their job at any time after the mortgage offer?

Reluctant to post this as you are understandably upset and shocked, and disappointed at losing money as any of us would be.

Lenders make decisions on facts and they won't take account of your 'intention to go back to work' or the fact that your childcare costs won't be too bad as you'll get free hours etc. The facts are that your PT salary is lower than what you were paid 3 years ago. You now have 2 dependants and not 1. COL has gone up etc etc. I know it feels personal but an intention to return to work means zero to a lender. You can change your mind and not go back at the last minute. I know people can lose their jobs at any time but the lenders are looking at current info on you.

If you can I'd suggest holding off until you do return to work. Get a different more proactive broker and insist they include your additional £7-8k income. Good luck!!

As I said before, to lenders “intention to work” means the same as unemployed, so they would not count your past intermittent PT earnings as over the past 3yrs you have not earned more often than earned.

OP I had the same years ago - 2nd period of mat leave coincided with re-mortgage deadline. I'd gone vack part-time after 1st mat leave, had every document possible to show I was returning to work on same Ts and Cs.

There was a group of lenders (Santander IIRC was definitely one of them) that simply would not take my income into account znd would only offer a multiple of DH's salary. We used London & Country brokers who were very good, established that quite early on and just made sure we didn't apply to any of those lenders. Meant we had to shop around and didn't get quite as good an interest rate as we were hoping, but we got it sorted. Good luck.

I would imagine they have taken the soaring cost of living and additional dependant into account. I know people that have gone for loan approval renewals (they ‘expire’ in 3 months here), as house searching has taken an extended period of time, and despite income remaining the same their borrowing power has decreased each time due to increase in cost of living plus banks are heavily factoring in predicted rolling increases n interest rates.