Thirty-two-year-old Isabelle is a self-employed TV editor based in north London. In the autumn of 2020, shortly before giving birth and while on maternity leave, she and her long-term partner applied for a new mortgage because they needed to upsize in order to accommodate their growing family.
"We have a combined household income of more than £100,000 and, thanks to the Bank of Mum and Dad, we had a really sizeable deposit of £170,000," she explains. The property they were hoping to buy was around £700,000, which meant they were able to put down more than 20% upfront.
"I am freelance but I have earned consistently for years," Isabelle continues, "and my partner is employed PAYE so his earnings are stable too."
By the time they came around to buying, Isabelle had given birth and was receiving state statutory maternity pay.
"We used a mortgage advisor and found the home we wanted. We had a mortgage in principle when we made our offer and it was literally at the last moment before we exchanged contracts that our mortgage was rejected on the basis that my earnings had fallen because I was on maternity leave," Isabelle explains. "This was even though my bank statements and tax returns showed that I had been earning the same amount consistently for years."
Isabelle and her partner had applied for a mortgage with Santander. They fell victim to their lender’s affordability checks. "They said they basically treat maternity leave as if it’s just a year that you haven’t worked," she adds. "It’s ridiculous. Of course you don’t work when you’re on maternity leave but that has nothing to do with your earning capacity."
When the house they had hoped to move into with their young family fell through, Isabelle says she felt "completely discriminated against".
Sadly, her story is not uncommon. Mortgage lenders are not allowed to discriminate against pregnant women and mothers. They cannot ask whether you are pregnant or on maternity leave when you apply for a mortgage as this would be discriminatory under the Equality Act 2010.
So how could this happen? There have been tighter lending rules since the global financial crash of 2008 which mean that lenders are legally entitled and required to take into account any changes in a mortgage applicant’s incomings and outgoings.
David Hollingworth is a mortgage expert. He is the associate director of communications at L&C Mortgages, the UK’s largest fee-free mortgage broker and advisor.
"Lenders have to look at affordability when deciding how much they can lend. That takes into account income and outgoings not just now but also in the foreseeable future," he explains. "As a result they will take into account any potential change to finances including childcare costs or change to income."
We should be doing more to help families access the housing they need at the time that they need it.
Ros Bragg, maternity action
David adds that "lenders will typically be able to factor in income after the return to work on confirmation that the income will be ongoing" but notes that "if there will be childcare costs to account for then that will be factored in and can clearly have an impact on the potential borrowing."
It may not be explicit but it seems, then, that pregnant women and new mothers are being discriminated against implicitly and by proxy on the basis of affordability.
During the pandemic UK house prices have reached record highs, which makes getting a sizeable deposit together difficult, even with the help of family. As the Women's Budget Group has warned, this has particularly impacted women. On top of that, some lenders began to ask for larger deposits to ensure healthy loan-to-value (LTV) ratios (this is the amount you borrow in relation to your deposit and the value of the property), particularly when dealing with self-employed mortgage applicants like Isabelle.
When approached by Refinery29 for comment, Santander confirmed their eligibility requirements for both self-employed and employed mortgage applicants.
When assessing affordability for self-employed applicants, they said they look at the last two tax years’ trading accounts and take an average income across the two years. They confirmed that their current maximum LTV for self-employed applicants is 75%. This was limited to 60% LTV for self-employed applicants between January and March 2021.
For employed applicants, Santander confirmed that they would require the person's latest payslip, their last payslip prior to maternity/parental leave, showing their full salary, details of the lowest income expected during maternity/parental leave and any alternative source of funds, such as savings, that will be used to support payments and living costs as well as confirmation of whether they intend to return to work on the same terms as before they started maternity/parental leave.
Santander added that if the applicant (or the applicant's partner, if it is a joint mortgage application) will be changing their working pattern following parental leave, then they would also need a letter from their employer confirming their return to work conditions.
A spokesperson for Santander told Refinery29: "As a responsible lender, we review applications in line with our lending criteria and take the applicant’s full financial circumstances into account to ensure the mortgage is affordable both in the near and long term."
Sabrina Hall has been a mortgage advisor for 20 years and runs her own company, Kind Financial Services. Unlike Isabelle’s mortgage advisor she has never had a client turned down when applying for a mortgage while pregnant or on maternity leave. This is not because the problem isn’t real but because of how she would advise clients in a similar situation.
"We know this is an issue," Sabrina explains. "The lenders' criteria on this varies but most commonly for employed people they tend to use a person’s last payslip before they went on maternity leave. They will also ask some additional questions about when that person plans to return to work and whether they will go back full-time as well as what childcare costs they will have." All of this will be taken into account in affordability checks.
Sabrina says that self-employed mortgage applicants like Isabelle are in a particularly difficult position. "The only income most lenders will use is the most recent two years' taxable income," she explains. "For my clients who have taken maternity leave, this could have a significant impact on the figures showing on their accounts, particularly if their maternity leave spans two tax years."
It is, Sabrina adds, "a minefield" and, as things stand, she would advise both employed and self-employed women and new mothers to plan years ahead.
Implicit discrimination against pregnant women and mothers in the mortgage market is a concern for Maternity Action, the UK’s maternity rights charity. Ros Bragg, its director, told Refinery29 that the charity’s advice lines are increasingly and regularly hearing from women whose mortgage applications have been declined because of their pregnancy.
"Pregnancy discrimination is unlawful so mortgage providers cannot refuse a mortgage purely because a woman is having a baby," Ros explains. "However, mortgage providers can look at women's ability to afford repayments, which means that the legal position can get quite murky."
She adds that this is happening against a complex financial backdrop. "Maternity pay in the UK is very low by international standards and equates to only half of the minimum wage for a 35 hour week," she continues. "The difficulties many women face in securing a mortgage could be significantly reduced by increasing the rate of maternity pay. We know that new families face the double pressures of a drop in income and the additional costs of buggies, clothes and equipment."
The emotional toll of housing stress cannot be underestimated, particularly when you need more space to accommodate a growing family.
"We know how important it is for families to sort out their housing before the new baby arrives, rather than trying to balance a house move with childcare and sleepless nights," Ros adds. "We should be doing more to help families access the housing they need at the time that they need it."