SEISS’s indirect discrimination ruling could ‘easily translate’ into mortgage affordability assessments for lenders

Women’s charity Pregnant Then Screwed hailed an appeals court ruling that ruled that the Self-Employed Income Support Scheme (SEISS) calculations indirectly discriminate against new mothers and warned lenders that this could have ramifications for the mortgage industry.

The ruling said SEISS, introduced by the government in 2020 to offer financial assistance to self-employed workers, indirectly resulted in lower payments to recent mothers, and low payments were linked to gender.

He calculated the payouts based on a percentage of average profits over the past three years. Women who were in maternity during these years received lower payments that did not reflect typical benefits.

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

Talk to Mortgage solutions, chief executive and founder of the association, Joeli Brearley, said she had received hundreds of complaints about maternity leave and mortgages because it resulted in lower income.

“This decision says very clearly that you cannot be harmed because of maternity leave, even if it is indirect discrimination,” she said.

She said the move could “very easily translate” into mortgages and called on lenders to take a more flexible approach to affordability and maternity leave.

“We want to make sure they [lenders] ask if there is a decrease, is it because of parental or adoption leave, and if that then eliminates that part of their calculations.

She added that the association is in talks with a law firm about setting up a helpline specifically for mortgage-related issues if people suspect that mortgage applications are being turned down. for reasons of maternity leave.

Challenges for lenders

However, brokers say lenders face underwriting issues when evaluating maternity leave, especially for self-employed borrowers.

Chris Sykes, Managing Partner and Mortgage Consultant at Private Finance, said when someone was employed and went on maternity leave, it was more “black and white”.

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

Sykes said that, by comparison, managing maternity leave for self-employed borrowers was “different and difficult”. Incomes are more varied because they are self-employed, even if the borrowers have returned to work and have returned to work for a few months at previous levels.

Sykes added that for independent borrowers who are on maternity leave or who have recently taken it, brokers on maternity leave have to “do a lot of justifications” with a traditional lender or go to a specialist lender.

He said: “There aren’t a lot of options and each case is assessed individually.”

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

He added, “The balance is finding a way that doesn’t discriminate against people on maternity leave, but also considers affordability so that you don’t put someone in a difficult position. “

Lenders should also consider other factors, such as child care, when borrowers return to work.

Hollingworth explained: “Since child care costs can be so large that they could clearly have an impact on the disposable income of the borrower and, therefore, can strain the amount of borrowing available.

Sykes said another consideration for lenders is making sure they lend fairly and that borrowers can make repayments.

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

He added: “I wish lenders were more flexible with maternity leave, but I understand their approach.”