What would you like, children or a mortgage?

Mortgage lenders are penalising home owners with children by reducing the amount they can borrow. The crackdown could potentially prevent them from switching to cheaper deals when interest rates rise.

Many banks and building societies have tightened their affordability criteria in light of the Financial Services Authority's post-credit-crunch review of the mortgage market. But it has emerged that families with children are being hit hard.

Parents will now usually qualify for a smaller mortgage than similar couples without children. Depending on the lender, the reduction might be about 10pc, but could be as high as nearly 20pc. This has triggered fears that parents may not be able to switch to fixed-rate and other competitive deals to protect the family home when interest rates finally begin to rise.

When brokers , like myself, begin the mortgage application process for a client, they tap in income, any other credit liabilities and basic lifestyle information, such as whether they have children.

At Santander, for example, a couple with no children both earning £25,000 might be offered £201,687, while an identically credit-scored couple with two children would get only £179,852. The amount drops again for four children to £174,420.Customers with very high credit score see a slightly smaller reduction with Santander. A childless pair with a gold-plated credit score might be offered £237,625, which drops to £219,485 for two children and £214,973 for four.

This pattern is followed to a greater or lesser extent at most big banks and building societies. Halifax will lend the same couple £225,000 via a broker, unless they have children. Then the amount falls to £213,000 for two children, but bizarrely goes up slightly for four to £214,185.

Applications to Nationwide Building Society via the broker channel take the biggest hit. A childless couple might be able to borrow £207,700. The amount falls to £174,200 for two children but by 18pc to £170,400 for three or more. Even so, a childless couple may qualify for £225,000, falling to £222,000 with two children and £217,000 with three children.

A spokesman for the Council of Mortgage Lenders acknowledged that lenders were increasingly taking this approach. "I'm afraid this is the way the world now is. Lending has become more sophisticated, which was inevitable given the change in the regulatory requirements," she said.

Some brokers describe the new approach as "nonsense". For example, only children up to the age of 18 will see your loan cut, whereas many parents spend far more on their offspring above this age as they support them through university.

Lenders often use data from the Office for National Statistics to decide what it costs to bring up a child, whereas what families actually spend can differ widely.On top of this, parents will now also be routinely asked about childcare costs and whether a couple are paying school fees. If you fill in this data as well, the loan is likely to be cut further.

Finally, brokers question the logic of offering a childless young couple a larger loan today, when in two or three years they may have a family, and not be able to remortgage for the same amount.

Another industry insider commented: "Lenders have to build these affordability models so they can demonstrate to the regulator, if challenged, that they have been lending responsibly. But these things are computers. There is no leeway for human intervention or discretion.It is all a bit of a nonsense. People live their lives quite differently. Couples with children stay at home every evening because they can't go out. Does this really mean they spend more than childless couples who are out every night, and take several foreign holidays a year?"

The concern is that if they cannot borrow today as much as the mortgage advanced a few years ago, parents may be prevented from switching to cheaper or safer loans as interest rates rise.

But lenders all have different attitudes to children. The amount they slice off varies hugely from institution to institution and even between different loans at the same bank. Shopping around is vital and a good broker can help with this process.

The CML defended the lenders' actions. A spokesman said: "If you have to have proxies for family expenses, the cost of children is a reasonable one."