SEISS indirect discrimination ruling could ‘easily translate’ to lender mortgage affordability assessments

SEISS indirect discrimination ruling could ‘easily translate’ to lender mortgage affordability assessments

 

The ruling stated that the SEISS, which was introduced by the government in 2020 to offer financial aid to the self-employed, indirectly led to lower payments to recent mothers and the low payments were gender related.

It calculated payments based on a percentage of average profits over the past three years. Women who were on maternity in those years received lower payments that did not reflect typical profits.

Pregnant Then Screwed, who brought the case, said that this ruling could have wider applications for women who are denied mortgage loans because they took a period of maternity leave.

Speaking to Mortgage Solutions, chief executive and founder of the charity, Joeli Brearley, said that it had received hundreds of complaints around maternity leave and mortgages as it had led to a dip in earnings.

“This ruling said very clearly that you can’t suffer a detriment because of maternity leave, even if it is indirect discrimination,” she said.

She said that this ruling could “very easily translate” to mortgages and called on lenders to take a more flexible approach to affordability and maternity leave.

“We want to make sure that they [lenders] are asking if there is a dip, is it because of parental or adoption leave, and if it is then eliminating that part from their calculations.”

She added that the charity is in discussions with a law firm about setting up a helpline specifically for mortgage-related queries if people suspect mortgage applications are rejected for maternity leave reasons.

Lender challenges

However, brokers say that lenders face underwriting challenges when assessing maternity leave, especially for self-employed borrowers.

Chris Sykes, Private Finance’s associate director and mortgage consultant, said that when someone was employed and went on maternity leave it was more “black and white”.

He said that for employed borrowers on maternity leave lenders would look at previous salary, earnings during maternity leave, savings in place and when borrowers would return to work for the affordability assessment. This way, affordability is based on previous levels of income if return to work is clear and there are savings in place.

Sykes said by comparison, dealing with maternity leave for self-employed borrowers was “different and difficult”. Income is more varied because it is not salaried, even if borrowers had returned to work and had gone back to work for a few months at previous levels.

Sykes added that for self-employed borrowers who are on, or have recently taken, maternity leave brokers had “to do a lot of justification” with a mainstream lender or go to a specialist lender.

He said: “There are not a lot of options and and each case is assessed individually.”

David Hollingworth, L&C Mortgages associate director of communications, said lenders assessing maternity leave needed a balanced approach, especially as it was likely a “temporary position”.

He added: “The balance is to find a way that won’t discriminate against those on maternity leave but equally considers affordability so as not to put someone in a difficult position.”

Lenders also have to take in other factors, such as childcare, when borrowers return to work.

Hollingworth explained: “Given childcare costs can be so substantial that could clearly have an impact on the borrower’s disposable income and as a result can weigh on the borrowing amount available.”

Sykes said that another consideration for lenders is ensuring that they are lending fairly and borrowers can make repayments.

He said: “If they can’t prove that income is at previous levels, they lend and the borrower can’t pay the mortgages then they could be lending irresponsibly, it could become bad debt and the regulator could come asking why they lent .”

He added: “I would love lenders to be more flexible with maternity leave, but I understand their approach.”