UK banks to offer mortgages on flats with cladding

The UK’s six largest banks will begin lending on properties with cladding that are 11 metres or taller from January, making it easier for homeowners to sell up after years of uncertainty following the Grenfell Tower disaster in 2017.

From January 9 next year, lenders including Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, NatWest and Santander will be able to consider mortgage applications, provided there is proof that cladding remediation work will be covered by developers, leaseholder protections or a recognised government scheme.

In 2017, a huge fire destroyed the Grenfell Tower block in west London and killed 72 people, prompting scrutiny of safety standards and building regulations for tower blocks in England.

“Lenders are committed to ensuring that those who want to buy or remortgage flats affected by building safety issues will be able to access mortgage finance, which will restore confidence in the market,” said industry trade body UK Finance.

The announcement comes after the Royal Institution of Chartered Surveyors published a framework earlier this month designed to simplify lending by making it easier to value properties with cladding.

An inquiry into the Grenfell disaster revealed widespread flaws in the construction of high-rise blocks, prompting mortgage lenders to retreat from the market and causing the trade in affected homes to grind to a halt.

While high-rise tower blocks with similar cladding to Grenfell were the original focus of government scrutiny, in January 2020 ministers guided that multistorey, multi-occupancy residential buildings of any height should be assessed for fire risk.

About 840,000 flats were affected according to government analysis, in effect making them unsellable until they had confirmation of building safety. People living in affected properties have had to resort to temporary safety measures such as on-site fire monitors costing tens of thousands of pounds.

In July, a landmark judgment in the High Court in London found a contractor liable for the cost of removing unsafe cladding. The legal precedent could have serious implications for contractors, given that the total cost of fixing unsafe buildings is expected to exceed £10bn.

The government estimates that an upcoming building safety levy on developers of residential buildings will collect £3bn over the next decade.

Jas Singh, chief executive for consumer lending at Lloyds, the UK’s largest mortgage lender, said that the “move will really simplify things for those buying homes in properties five storeys or above”.

Santander said it was “committed to ensuring that mortgage holders living in flats, impacted by building safety issues, are supported so that they can buy and sell their properties with certainty”.

Nationwide said it would lend to people in homes affected by cladding if the properties were covered by the government or developer remediation schemes “subject to our normal lending policy and checks”.

HSBC UK said that the changes “will provide valuers with improved guidance to enable lending on properties with cladding, while providing more clarity and certainty for those living, or wanting to purchase a property in a block with cladding”.