Big six lenders to start lending on cladding affected flats

Homeowners struggling to sell or remortgage properties with cladding that are 11 metres or taller have been thrown a lifeline after the UK’s six biggest mortgage lenders said they would be prepared to lend on affected flats.

Lloyds Banking Group, Barclays, HSBC, Nationwide Building Society, Santander and NatWest have all agreed to lend on properties with cladding provided there is proof that any dangerous materials will be removed, or that affected properties are covered by Government schemes or leasehold protections.

This follows the publication of new guidance from the Royal Institution of Chartered Surveyors (RICS) on how to value property with cladding.
A spokesman for UK Finance, the trade body for the banking sector said: “With the RICS guidance now in place, from Monday 9 January 2023 lenders will be able to consider mortgage applications on properties in buildings in England of 11m and over in height. Lenders will need evidence that buildings will be self-remediated by developers or covered by a recognised government scheme or by leaseholder protections contained in the Building Safety Act, as evidenced by a Leaseholder Deed of Certificate.”

Mortgage providers first started requiring assurances about the safety of external wall systems as a condition of approving mortgage applications following the Grenfell Tower fire tragedy in 2017. Mortgage applications would typically be refused for properties with cladding unless an External Wall Fire Review Process (EWS1) form could be submitted. The form provides an assessment of the presence of combustible materials in the outside wall of a residential building.

However, an acute market shortage of fire engineers to carry out EWS1 assessments, combined with limited guidance on valuations, has affected lenders’ ability to lend, leaving many people as ‘mortgage prisoners’ unable to sell or remortgage their homes.

The Government minister for building safety, Lee Rowley said: “This guidance from RICS is an important step forward in encouraging lenders to rethink their policy on lending against flats with cladding. This is another step forward in giving the industry the confidence it needs to help get the market moving again, supporting both buyers and sellers to get on and move up the housing ladder.”