The Maternity Leave Mortgage Challenge
Standard mortgage affordability is calculated on income. During maternity leave, many borrowers receive Statutory Maternity Pay (SMP) for up to 39 weeks - currently the lower of £184.03 per week or 90% of average weekly earnings for the first six weeks, then £184.03 per week for the remaining 33 weeks. This is substantially lower than most borrowers' standard salary. A lender assessing affordability purely on SMP will offer a much lower maximum mortgage than the borrower's employment income would otherwise support.
Lenders Who Use Return-to-Work Income
A number of mortgage lenders will assess affordability based on the borrower's confirmed return-to-work income rather than their current SMP income - providing the return-to-work date is confirmed and evidenced by the employer. The evidence typically required is a letter from the employer confirming: the borrower is on an approved period of maternity leave; their position and salary on return; and the expected return date. This employer letter, combined with recent payslips showing pre-leave income, allows affordability to be assessed on the full employment income.
What Lenders Typically Require
For maternity leave mortgage applications, lenders typically want: three to six months of payslips showing pre-leave income; an employer letter confirming the return-to-work salary and date; evidence of SMP payments (payslips during leave or SMP1 form); and sometimes a signed statement from the borrower confirming their intention to return to work. Where the borrower is self-employed and on a break from their business, income evidence from the most recent full year of trading is typically used.
- Three to six months of payslips showing pre-leave income
- An employer letter confirming the return-to-work salary and date
- Evidence of SMP payments (payslips during leave or SMP1 form)
- Sometimes a signed statement confirming the intention to return to work
- For self-employed borrowers, income evidence from the most recent full year of trading
Shared Parental Leave
The same principles apply to shared parental leave and paternity leave. Where the leave is short (two weeks of statutory paternity leave), lenders typically use the full employment income with no adjustment. Longer periods of shared parental leave are assessed in the same way as maternity leave - using return-to-work income with employer confirmation.
Joint Applications During Maternity Leave
Where one partner is on maternity leave and the other is in full-time employment, the joint application can be assessed on the employed partner's full income, with the returning partner's income included where the lender's policy permits. This is often the most straightforward approach for couples, as it reduces reliance on the complex maternity income assessment.