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Be aware! Spending too much on childcare can result in refusal for mortgage applicants

One in six families have been turned down for a mortgage â€“ or have been told they can only borrow less â€“ because of the sums they’re having to spend on childcare.

Research among 1,000 parents with children aged 12 and under, and who had applied for a mortgage in the past 10 years, found 17 percent cited childcare costs as a reason they struggled to obtain a mortgage.

Stricter lending criteria introduced under the Government’s Mortgage Market Review in 2014 mean that “affordability tests” for families now apply. Childcare costs and other “non-discretionary”, regular outgoings are taken into greater consideration.

Childcare costs have risen by 38 percent in the past five years.

Price comparison website, which undertook the research, found that two-thirds of families say they have tried to hide the cost of their childcare in the run-up to the mortgage application process.

Three in 10 people have used grandparents for childcare in order to make their finances appear better ahead of the mortgage application, while 27 percent have relied on friends to take care of after-school childcare.

Applicants also blame mortgage companies for “not using a common sense approach” in the application process.

Two-fifths of families said that their lender did not take into account the fact that childcare costs would fall in the near future. For example, costs reduce when children reach the age of three and become eligible for free government childcare.

Lenders have a responsibility to make sure people only borrow within their means and can afford future repayments but they also need to reassure homebuyers that their whole financial picture is being considered.