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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 10/03/2021
elderly couple and advisor

Leaseholders of flats are understandably concerned that their homes may now be less attractive to buyers and to lenders for mortgages, secured loans and equity release.

The Government has recently committed £4.6 billion towards the replacement of dangerous cladding on tower blocks over 18 metres in height. Those in units lower than 18 metres will not be able to access these funds and instead will need to use special loans to pay for replacement cladding, with monthly instalments capped at £50 per month.

The Government funding has been criticised by those in the property sector and by leaseholders disappointed not to receive more financial support.

Those over the age of 55 that live in a leasehold property are eligible to apply for equity release, but those that have cladded properties may be concerned that equity release lenders might turn them away. The Equity Release Council (ERC), the industry body that represents the majority of equity release lenders, stated that some of their members may require a qualified surveyor to assess the potential fire safety risks via the external wall system fire safety (EWS) process based on guidance by the Royal Institute of Chartered Surveyors (RICS).

RICS announced this week that lenders will no longer need to use the EWS process when issuing a mortgage on leasehold flats of four stories or below, as long as they are not clad in aluminium composite material, other composite materials or high-pressure laminate. Buildings of five or six storeys will also not need the EWS check if they do not have cladding of this type and if cladding is present on less than 25% of the building. These buildings also need to not have stacked balconies or decking of combustible materials.

This will help more than 500,000 leaseholders according to figures from the Government.

The ERC also stated that equity release lenders may also have minimum requirements for the number of years left on a lease and require surveyors to examine properties above a certain height.

Dave Harris, CEO at more2life, a leading later life lender, says: “As with all types of lending there isn’t a one size fits all answer. It is possible to lend on a property with cladding however there are many factors in play including the property itself and the type of cladding used, which need to be considered. At more2life we follow the guidance as set out by Government, fire safety regulators and the RICS and in some cases EWS1 (External Wall Fire Review Form) may be required. Once a property has been made fire safe and/or has the required fire safety sign off in place, we would investigate whether we could lend on the property in relation to the standard factors required, similar to a residential mortgage such as property value and LTV.”

Stephen Lowe, group communications director at retirement specialist Just Group, commented:

“There are a number of factors we take into account when assessing whether we can offer a lifetime mortgage on a property – that’s to protect both us the lender and the borrower who benefits from a no negative equity guarantee. As many flats are leasehold the time remaining on the lease is an important consideration, and of course fire safety is another factor as many flats are in blocks. Since 2016 we’ve asked our surveyors to look closely at any property of more than seven storeys and since 2017 we’ve followed the EWS check that RICS has established and continue to do so. But our overarching approach is to look at each application on a case-by-case basis and we will offer a lifetime mortgage to the customer where we can.”

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