Child benefit cuts could stop you getting a better mortgage From January, child benefit payments will start to be withdrawn if a parent - or a partner who lives with them - earns more than £50,000. Once one member of the household earns more than £60,000, the payment will be removed completely. However, families with two earners taking home £50,000 each will keep their child benefit in full, even though their household income is £100,000. Currently 7.8 million households receive child benefit, getting £20.30 a week for their first child and £13.40 for each subsequent child. This means that a family with two children will lose £1,752 a year if one parent earns more than £60,000; those with three will lose £2,449. Ray Boulger of John Charcol, the mortgage broker, said: "Clearly not all families who are losing this benefit will struggle to remortgage next year. But if you borrowed the maximum when you last remortgaged, have not had any significant pay rises since then and have two or more children, you could be in trouble. He said families who were nearing the end of two-year fixed-rate deals could be worst affected, as earnings have stagnated and house prices have slipped over this period, so they could also have less equity in their home. This will also help to determine how much lenders will let them borrow. Lenders now use complex calculations to determine affordability, rather than the old formula of three times your basic income or two and a half times joint incomes. Today, lenders will credit score customers to determine what they can borrow. Mr Boulger said that in some cases up to 300 different factors might be taken into consideration. As well as looking at a detailed breakdown of earnings and outgoings, lenders will take into account factors such as your age, what deposit you can put down and assumptions about future interest rates and inflation. This is to ensure that, should interest rates and inflation rise, borrowers will still be able to afford their loans. Mr Boulger said: "Although the best five-year fixed-rate deals are now charging around 3pc, most lenders assume an interest rate of around 7.5pc when calculating how much you can afford to borrow." Mark Harris, the chief executive of SPF Private Clients, another broker, said these processes could be far too complex. Assessing affordability is crucial, but some lenders go too far. We have seen mortgage forms asking how much is spent on Christmas, takeaways, birthday presents and so on. It is overkill. What next, how much you spend on a daily newspaper? To further complicate matters, not all lenders use the same algorithms or take into account the same information. For example, Halifax and Lloyds TSB will factor in just half of your child benefit, as well as half of other benefits such as disability living allowance and carers allowance. In contrast, Santander and Nationwide will take into account all your child benefit payments, although Santander will consider only 50pc of most other benefits, while Woolwich doesn't tend to factor these payments in to its affordability calculations at all, according to Mr Boulger. These parameters also change frequently. Jonathan Harris, director of mortgage broker Anderson Harris, said the real issue with affordability was the lack of transparency from lenders. Affordability is a movable feast, with lenders tweaking their requirements depending on their appetite to lend at any given time. This is extremely frustrating for borrowers - the impact that, say, two children have on an affordability calculator varies depending on how keen a lender is to boost its mortgage book at the time of the application. But home owners who find themselves "mortgage prisoners" as a result of these changes aren't necessarily condemned to remain on their lender's SVR (standard variable rate). As Mr Harris pointed out, affordability calculations are subject to change, so even though one lender turns you down it doesn't follow that others will - or even that the same lender will a month or two later. For those whose mortgage is close to the maximum lending limit, it can be useful to talk to a broker, who is more likely to know which banks are looking to increase their mortgage lending, and which take a more generous view on things such as child benefit. Mr Boulger added: "Rather than remortgage and switch lenders, look to transfer your mortgage product with your existing lender." Provided that you are not increasing the size of your home loan, most banks and building societies won't ask you to prove your income again if it is a simple product switch. You may not get the very cheapest mortgage deal on the market, but many home owners will find that they can still save money by switching from their current lender's SVR to a two-year or five-year fix. He added: "Funding for Lending [the Bank of England's scheme for cheap loans to banks] has helped trigger something of a price war, with some very competitively priced two-year and five-year fixed-rate deals. A few months ago if you were sitting on a standard SVR at about 4pc it may not have seemed worth remortgaging. But this is not the case any more. Five-year fixes are looking more attractive as they offer some protection should Bank Rate start to rise before the end of this period. Most experts are not predicting any serious rise in interest rates while the economy remains so weak. However, this won't necessarily help those who find that their mortgage is now more than 80pc of the value of their home, thanks to falling property prices. The interest rates charged to those who are borrowing more than 85pc or 90pc of their property's value are significantly higher than for those who have more equity in their home. To date the mortgage price war has centred on borrowers with at least 40pc equity. But if the Funding for Lending scheme continues to reinvigorate the mortgage market in the new year, there are hopes that those with less equity could also see some benefit. This may prove welcome relief for those families struggling with punitive lending restrictions, which will include many who have lost their child benefit.