Several leading UK banks have updated their mortgage policies to make it easier for individuals receiving Child Benefit to qualify for larger home loans.
Santander, a major player in the UK banking sector, has recently announced a pivotal adjustment to their mortgage rules. Starting from April 9, they will consider Child Benefit as a part of the income when assessing mortgage affordability for households earning up to £60,000. This shift in policy means that the Child Benefit payments families receive will now be taken into account in mortgage calculations, potentially increasing the amount they can borrow.
Broad Support Across Banking Giants
Following in Santander’s footsteps, other top banks like NatWest, Nationwide, and Lloyds Banking Group are also set to revise their lending criteria. Lloyds has already made these changes, whereas NatWest and Nationwide are expected to implement similar policies soon. This collective move comes in response to recent government adjustments to the High Income Child Benefit Charge (HICBC), which affects how much Child Benefit high earners can claim.
Understanding Child Benefit
Child Benefit is a government payment provided to guardians of children under 16, or under 20 if they are in approved education or training. Before the changes, families earning less than £50,000 annually received the full benefit amount. As earnings exceeded this threshold, a portion of the benefit had to be repaid. Previously, those earning over £60,000 had to repay the entire benefit.
New Earnings Thresholds Increase Eligibility
Recent adjustments have raised the earnings threshold for Child Benefit repayment. The new rules mean you don’t start repaying until you earn £60,000, with the benefit tapering off completely at £80,000 a year. This increase in the income limit enables more families to retain their full Child Benefit, thus improving their overall financial standing when applying for mortgages.
Positive Implications for Home Buyers
Mortgage experts are hailing these changes as a boon for potential home buyers. Rosie Hooper from Quilter Cheviot and Nicholas Mendes from John Charcol have both expressed optimism, noting that the inclusion of Child Benefit in mortgage assessments could significantly enhance borrowing capacities. For many, this could be the crucial difference in securing a larger or better-located home.
Practical Advice for Mortgage Applicants
When applying for a mortgage, it’s crucial to present proof of Child Benefit as part of your financial documentation. Prospective home buyers should be aware that some lenders may have specific requirements concerning the percentage of Child Benefit that can contribute towards mortgage payments. Consulting with an experienced mortgage broker can provide valuable guidance and maximise your chances of getting favourable mortgage terms based on your benefit income.