MILLIONS of parents welcome — or at least tolerate — their grown-up children moving back home to live with them in what has become a common scenario for families. More than a quarter of people aged 20-34 now live with their mothers and fathers.
But many parents are unaware they could be punished for welcoming back these “boomerang” children, who have been driven home by high rents and poor job prospects. Experts warn new rules mean mortgage lenders are showing an “absence of compassion and common sense” and penalising such homeowners.
Previously, a 30-year-old who had returned home would not usually have been factored in to their parents’ mortgage application. As a result of the rule changes, if this child has no income, they are classed as a dependant, which may limit the amount their parents can borrow if they remortgage or want to move house.
Many parents will be hoping to do this as they near retirement and look to downsize. Remortgaging in such cases is an agonising process that is becoming increasingly difficult, as our Play Fair on Age campaign has repeatedly shown.
For many lenders, the strict approach to boomerang children stems from the mortgage market review (MMR) introduced last year by the Financial Conduct Authority, the City regulator. This tightened the criteria for lenders when approving applications, to try to ensure borrowers could genuinely afford their mortgages long term, particularly when interest rates rise.
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Nationwide, Britain’s biggest building society, said: “Dependants must be taken into account . . . regardless of age — and any costs [to the parents] taken into account. This is a requirement of the MMR, and therefore is standard across the industry. If the adult living with their parents is not working and does not have an income, they are a dependant.”
One of Britain’s biggest lenders, Halifax, said: “We class anyone who is financially reliant on the applicant, who is not a party to the mortgage yet who resides at the property for at least some of their time, to be a dependant.
“Grown-up children are counted as dependants where they reside at the property and are unemployed or still in full-time education. Where the children can fully support themselves — for example, they are working and paying board to their parents — then they do not need to be keyed [counted] as a dependant.”
HSBC and Royal Bank of Scotland also confirmed they would class such an adult with no income as a dependant.
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The lenders’ approach has outraged industry experts, who feel families are being unnecessarily punished. A record 3.3m adults aged 20-34 now live with a parent or parents, according to the Office for National Statistics (ONS).
They may be saving for a deposit on a home, or have been priced out of renting by the rapidly rising cost, which last week hit a record average of more than £800 a month in England and Wales. They may simply want the freedom of being at home in order to decide which career path to pursue, or just be living there while they undertake the increasingly gruelling process of applying for a graduate job.
Paul Green of the over-50s specialist Saga said: “Lending a helping hand to your children can land parents in a heap of trouble, as an absence of compassion and common sense appears to have gripped some lenders.” Mark Harris of the mortgage broker SPF Private Clients said: “With more children returning home after university because it is so expensive to buy or even just rent, many parents could get caught out, as this will affect their ability to get a mortgage.
“Parents must plan ahead of making any mortgage application, ensuring that grown-up children have a part-time job at the very least so they appear less of a financial burden.”
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Harris said it was a good idea to make the child get any job they could, simply to boost the application’s chance of success.
When calculating affordability, some lenders now use ONS data to work out how much a dependant would typically cost you, depending on your circumstances.
Ian Gray, a broker at largemortgageloans.com, said: “Some banks would factor in the grown-up adult in the same way as a minor child, and reduce the maximum loan accordingly.
“Others will look at the real costs involved in having the adult living there, and analyse the parents’ bank statements to see if they really spend money each month supporting the adult child. If they spend more on food and utilities, then we have to declare the real total costs and it is factored in. The higher the costs, the lower the approved mortgage amount.”