The Gender Mortgage Gap: Why Single Mums Are Being Denied Mortgages

After the global financial crisis in 2008 mortgage providers tightened their affordability checks in line with requirements imposed by the Bank of England. This meant lenders were legally required to take into account any changes in an applicant’s incomings and outgoings.

Prospective homebuyers can expect to be allowed to borrow around 4.5 times their salary (or an average of two to three years’ income for self-employed applicants) as a mortgage. On this basis, Emily’s situation doesn’t add up. So, what’s going on?

“I was told it’s because some of my income – the £20,000 or so I receive in child support from my daughter’s father – is not court ordered. I have an agreement in writing with him but it wasn’t enough. I also work for myself which makes it harder,” Emily continues. “One bank told me that they wouldn’t count my child support because when my daughter is older I won’t receive it any more – but can an employed person guarantee that they’ll be in the same job forever? No.”

It has become increasingly difficult for younger people – known as ‘generation rent’ – to get on the property ladder because wages have not kept pace with house prices since the early 2000s. The average house price is 65 times higher than it was in 1970 while average wages are only 36 times higher.

The pandemic has exacerbated the situation; a combination of factors including people relocating in search of more space and the government’s decision to introduce a stamp-duty holiday mean that house prices have reached record post global-financial-crisis highs. According to the Office for National Statistics (ONS) UK house prices rose by 10.2 per cent in the year to 2021.

The gendered impact of this cannot be overlooked. The Women’s Budget Group (WBG) claims that just as there is a gender pay gap, there is a gender housing gap. In 2019, WBG’s research found there was not a single place in the country where it was affordable for the average woman to buy or rent a home on her own. This is because women’s median annual earnings are 36 per cent lower than men’s.

In 2021 the situation had worsened: according to WBG women needed 12.6 times their (average) salary to be able to afford a house in England – up from 12.2 times in 2019. Men, on average, needed 8.1 times their salary to buy.

This puts homeownership out of reach for many women, but the fact that a high earner such as Emily, who also has a hefty deposit, still can’t purchase a home speaks to how difficult it really is. “I regard my child support payments as income,” says Emily. “They are my income for raising our child – for the labour I undertake such as being available to take her to school. It should be considered.”

Megan, 33, from Kent, is a school teacher with one child, who separated from her ex-husband in 2020. She earns £51,700 a year and has court-mandated child support. However, she too has been declined for a mortgage.

“Before we separated I worked four days a week,” she explains. “I’m now full-time and I’ve had a pay rise but I’ve been told that I will need at least a year in this job before I’ll be considered. But property prices keep rising so, honestly, I feel like I’m just watching the situation get worse.”

Megan feels that she is being unfairly scrutinised despite being employed and can prove that her child support payments are guaranteed.

Rosalind Bragg, director of UK pregnancy charity Maternity Action, says she regularly hears from women in similar situations. “It is particularly difficult for pregnant women and mothers to negotiate the many requirements imposed on mortgage applicants,” she explains. “Financial institutions rarely accommodate the dips in income which, for many women, are part of balancing work and caring responsibilities."

A mortgage advisor for 20 years, Sabrina Hall runs Kind Financial Services. She explains that, unfortunately, single mothers who want to buy a home do have to jump through hoops. “Most lenders will accept child support with a court order, however one notable lender who doesn't is Coventry Building Society,” she says.

A spokesperson for Coventry Building Society confirmed that it is not currently accepting child support payments in its affordability assessments for new customers. “This is something we’re looking into for the future,” they said. They explained that for existing borrowers whose circumstances change, through a separation for example, they will “work with them on a case-by-case basis to support them as much as possible” as they remortgage or transfer their mortgage to a single-income household.

Hall notes that not all lenders take the same stance as Coventry. “Some will consider child support with proof of payments for the past 12 months, [these include] Santander, Barclays and Nationwide, but most will caveat it ‘subject to underwriters’ discretion’.”

The underwriting stage is where Emily came unstuck. “Some of these banks say they will accept proof of child support payments but, when it came down to it, I was rejected every time. I’m convinced that there is more going on behind the scenes.” Whether Emily’s hunch is true is difficult to prove.

We approached three of the UK’s largest mortgage lenders for comment – Nationwide, Santander and Lloyds. Lloyds did not return our request for comment.

A Nationwide spokesperson replied: “Nationwide includes both court ordered and informal child support payments as part of any income calculation. We have processes in place to support applicants should they need to transfer a joint mortgage into a sole name following the breakdown of their relationship. However, to do this the applicant taking on the mortgage must be able to afford the mortgage on their own. We know that affordability can be a challenge for many single applicants, which is why we have recently launched Helping Hand. Helping Hand offers enhanced criteria, including allowing eligible first-time buyers to borrow up to 5.5 times their income.”

Santander says they will take child maintenance payments into consideration, where the customer is able to provide a formal agreement (e.g. a court order) showing the amount of maintenance to be paid and three months’ bank statements showing the payments going into the applicant’s account.

There may be some light at the end of the tunnel. At the end of 2021, the Bank of England announced that it would be relaxing its mortgage lending rules moving forward. Whether this will help single mothers remains to be seen.

In the meantime, what advice would Hall give to make the process feel a little less overwhelming? “Whether it’s court mandated or not,” she replies, “I would suggest getting a regular child-support payment going into your bank account as soon as possible – this might be reliant on an amicable split however – rather than waiting for what the court agrees and then backdating any missed payments, which is more common after a difficult split.”

“The most important advice, however, is please, please, please, speak to an adviser. I come across people who thought they couldn't get a mortgage because their bank said no, but there are options available and an adviser may be able to help you navigate the [system] as lenders have significantly varying criteria.”

Against a backdrop of continued pandemic uncertainty and rising house prices, Emily and Megan feel that something has to give to make mortgages more accessible to single mothers. “I’m furious,” Megan says. “Why should I be penalised for taking time off to care for my child?”

Both women earn well above £31,000, the median annual salary in the UK today.

“It’s wild,” adds Emily. “Look at me – for two years I have been preparing for this: I have no overdraft, no credit card usage, but it’s still not enough.”