The changes to mortgage criteria mean the money people get from the Child Benefit payment can now count towards income affordability for a mortgage – this means people could potentially borrow more
Major UK banks are making major changes to their mortgage rules which will allow more people claiming Child Benefit to get on the property ladder.
Santander announced that it was now counting Child Benefit income up to £60,000 when considering mortgage affordability. This change, introduced on April 9, means the money people get from the child benefit payment can now count towards income affordability for a mortgage. This means people could potentially borrow more.
The update comes after the Government increased the threshold for when Child Benefit claimants start paying the High Income Child Benefit Charge (HICBC). NatWest, Nationwide and Lloyds Banking Group have also confirmed they are changing their criteria to reflect the benefit change. Lloyds Banking Group has already introduced the change, while NatWest and Nationwide said it would be made “in the near future” reports the Sun.
Child Benefit is a monthly payment made to someone responsible for a child under the age of 16, or under the age of 20 if they’re in approved education or training. Previously, you were eligible for the full amount of Child Benefit if you earned under £50,000 a year. Once you start to earn over this, you have to start paying some of it back. Once you earned over £60,000 you had to pay it all back.
From this month, the threshold for when you have to start paying the benefit back has risen and is now at £60,000. The higher limit has also increased to £80,000 a year. This means you can now earn up to £80,000 a year before your Child Benefit is completely stopped.
Mortgage experts have described the moves as “positive news for families looking to move to a new home”. Rosie Hooper, chartered financial planner at Quilter Cheviot, said: “Including Child Benefit payments within these assessments may mean that families are able to borrow more and therefore could move to a larger home or perhaps to a more favourable area to better suit their family if they so wished.”
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “These amendments will mean that prospective buyers can raise an additional £10,000-£15,000 which could be the difference between securing their dream home or having to make compromising or lose out on a property.”
When you apply for a mortgage, banks look at a range of different factors to decide whether they will lend you money and your mortgage lender will want to see evidence that you receive Child Benefit in your application. Before applying, you should also check whether the lender has specific conditions to their deals, such as only allowing you to use a certain percentage of your benefit payments to cover the mortgage. It’s a good idea to seek advice from an experienced mortgage broker when it comes to applying for a mortgage on benefit income.
