Business Property & Mortgages

Monday 20 May 2019

Don't have kids if you want to get a mortgage, first-time buyers told

Couple Using Laptop And Discussing Household Bills Sitting
Couple Using Laptop And Discussing Household Bills Sitting

Charlie Weston Personal Finance Editor

First-time home buyers have been warned not to have children if they want to get mortgage approval as childcare costs are seen as reducing borrowers' ability to repay loans.

It is estimated that lenders reduce the amount they will lend to potential first-time buyers by up €50,000 for every child in a family, it has emerged.

Karl Deeter, of Irish Mortgage Brokers, said it is nearly impossible to get a home loan if there are children, especially if there is only one income earner in the household. "Hold off having kids if you want a mortgage," Mr Deeter said.

He explained that the only banks lending to first-time buyers are Bank of Ireland and its subsidiary ICS, and AIB.

KBC Bank is doing some lending, but Permanent TSB, EBS and its subsidiary Haven, National Irish Bank and Ulster Bank are all shut for first-time buyer lending, he said.

This left the banks that are lending in a strong position to dictate terms, and the expense of raising children was proving to be a big turn-off.

"If you are thinking of buying a house or having kids then go for the house first.

"Having children reduces your ability to borrow with every bank that is lending," the broker warned.

The costs associated with raising children -- from buggies and nursery furniture to nappies, clothes, healthcare, child-care and entertainment bills -- are affecting what people can borrow.

Lenders are now generally reducing the income they will allow a potential buyer to put towards meeting mortgage repayments by between €200 and €250 a month.

This means that a family with four children could see the bank cut the monthly income it allows for servicing the mortgage by up to €1,000. And women on maternity leave, or those about to have a child, are increasingly being turned down for mortgages.

But this was not written "official" policy with lenders, Mr Deeter said.

Instead, banks are insisting on seeing a letter from the women telling their employer the date they intend to return to work, and details of the salary they will then be on.

"In a country where the family is enshrined in the Constitution, it seems unusual that having a family could be counter to your ability to buy a home for that family," Mr Deeter said.

"And where the children we are having will be footing the bill for the banks, it is odd to have those same banks avoid lending to those children's parents to ensure they have a home of their own."

A spokesman for the Irish Banking Federation said lenders were not singling out people with children for special treatment.

The spokesman said that responsible lending meant banks had to look after all the costs a household had when there was a loan application, whether that was childcare expenses or the cost of holidays.

Just 1,647 mortgages were made to first-time buyers in the three months to June, according to the Irish Banking Federation. This was more than half of all mortgages during that period.

Some economists believe there is pent-up demand for mortgages among the under-35s.

Just short of 475,000 households now rent, new census figures showed last month.

There was a 47pc increase in the number of households renting between 2006 and 2011.

Irish Independent

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