Parents penalised as mortgage lenders take the cost of bringing up children into account.
Families are being warned that they face a reduction in the amount they can borrow on a mortgage because of rising childcare costs.
In extreme examples, the size of home loans offered can be reduced by 80pc. As a result, many home owners will be prevented from switching to more competitive deals when interest rates rise or their current introductory offer ends.
The development comes as more than a million households face the loss or reduction of payments from child benefit, which took effect earlier this month.
Parents were also reminded that the cost of raising a child had reached a new high of £222,458, according to research from the insurer LV=, with childcare cited as one of the key reasons for the increase. Childcare costs, the report suggested, now averaged £63,738, compared with £39,613 a decade ago.
Apart from coping with this cost, it increasingly hampers families' ability to borrow. Following a review of the mortgage market by the City regulator, many lenders have tightened their affordability criteria.
This means that parents will now qualify for a smaller mortgage than couples without children. Depending on the lender, the reduction could be as high as 80pc, rendering many parents "mortgage prisoners" potentially left languishing on an expensive standard variable deal.
Lenders undertake a check on affordability when assessing the amount that they will lend to a borrower. Although such checks were previously based on fairly rudimentary income multiples, lenders now produce a more robust and individualised figure by applying affordability models.
When mortgage brokers begin the application process for clients, they ask about income, any other borrowings and basic lifestyle information, such as whether the clients have children.
"Affordability has been a key part of the regulator's review and so borrowers have found that they need to account for their monthly budgeting in more detail than before," said David Hollingworth of broker London & Country.
The impact of the cost of bringing up children on your home loan application should not be underestimated.
At HSBC, for example, a couple without children but each earning £25,000 might be offered a mortgage of £224,000. But a couple in identical financial circumstances but with a child and monthly childcare bills of £1,000 would get nearly 75pc less at £65,000.
The prospects are similar for single parents. A childless, debt-free single adult earning £50,000 might be offered £237,000, while a similar earner with one child and a monthly childcare bill of £1,000 would be offered less than half that amount at just £106,000.
According to brokers Trinity Financial, Yorkshire Building Society which, like HSBC (LSE: HSBA.L - news) , is often at the top of the best-buy tables would offer a childless couple £227,961, compared with just £53,869 if they had one child in childcare, a difference of 76pc. The Yorkshire would offer a single person without children £226,000. But the same person with a child and a monthly childcare bill of £1,000 would be offered just £50,500 a drop of 78pc.
Other child-related costs are also taken into account. "The cost of childcare is a consideration, as well as the general cost of bringing up children," said Jonathan Harris, a director of broker Anderson Harris. "If you're a stay-at-home parent, childcare costs might not be an issue, but the parent would be classed as a dependant, so it raises other issues for affordability."
The situation could be even worse for those who have lost their entitlement to child benefit. A family with two children will miss out on £1,752 a year of what is effectively tax-free income a loss of income that will be considered by some lenders. This could create difficulties for borrowers who mortgaged the maximum amount on their most recent deal and have not had significant pay rises since then.
However, Mark Harris, the head of broker SPF Private Clients, said that while the extra mouth to feed, nappies and private childcare provision would take their toll on mortgage affordability, those in work who had no childcare costs might find themselves better off.
"If there is no financial cost to childcare provision, such as when grandparents look after a child or a parent works from home, this will be taken into account in the lender's affordability calculation," he said.
Another factor that could affect parents is the reduced level of household income during maternity leave.
What new mothers get paid depends on their employers, although the bare minimum is six weeks at 90pc of full pay followed by 33 weeks' statutory maternity pay at a maximum of £135.45 a week. However, some firms offer much more and will pay three or more months at full pay followed by the same period at half pay.
Most lenders tend to underwrite the mortgage based on the current situation, but some may ask applicants about whether there is any foreseeable change to their circumstances that would affect affordability.
It is also common sense for a prospective parent to consider the ongoing affordability of any new borrowing given the additional costs or reduced income that they will have once their child is born.
"Some lenders can consider using 'back-to-work' income when there is an intention to return to work on the same terms," said Mr Hollingworth. "Nationwide Building Society, for example, will use the income expected on returning to work after maternity, subject to confirmation from the employer, but will factor in any expected childcare costs as well."
= So what can you do to avoid this costly dilemma? =
Shopping around is vital. This is where a broker can help, but it is worth contacting lenders directly yourself as they will sometimes be more generous than they would via brokers.
If you plan to start or extend a family, plan ahead as much as you can. If you are thinking of moving to a bigger home or remortgaging in the near future, it may be easier to do this while you have two incomes rather than waiting until one falls.
A spokesman for Yorkshire Building Society said: "As a responsible lender we assess affordability on a case-by-case basis, taking into account all income and expenditure for each applicant. Fixed monthly childcare costs and costs associated with having dependants are therefore built into our affordability calculations. Our lending criteria are designed to ensure that our customers do not borrow more than they can afford to repay over the term of their mortgage."
An HSBC spokesman said: "All our mortgage lending decisions are unique and based on individual customers' circumstances. We don't treat families, couples or single customers any differently; affordability is the key. As a responsible lender we need to ensure that customers are able to meet their repayments."