Can you get a mortgage on a property that has cladding?

Can you get a mortgage on a property that has cladding?

The UK cladding crisis arose following the tragic Grenfell Tower fire of June 2017 and The Bolton Club Fire of 15 November 2019. The fires spread uncontrollably due to cladding made of combustible materials, prompting a review of building regulations and fire safety issues in high-rise buildings.

Amid the consequent inquiries and discussion, the owners of affected properties have faced financial uncertainty alongside safety concerns, with many left ‘trapped’ in their mortgages. But there is new hope for those looking to buy, sell or remortgage a property with cladding issues.

Thanks to the protections established in the Building Safety Act 2022, six high street lenders offer mortgages on properties with cladding as long as they meet certain criteria. Before you make a mortgage application, it’s important to consult a mortgage broker to ensure you meet the requirements.

Read on for more information on how cladding issues affect homeowners and which lenders are now approving mortgage applications for affected properties.

Goldmanread is dedicated to finding the most favourable mortgage deals for our professional clients in Essex and beyond. For personalised advice on mortgages for flats with cladding, please contact Goldmanread.

What is cladding?

Cladding refers to a layer or ‘skin’ added to the external walls of buildings to provide thermal insulation and weather resistance. It is also used to enhance the aesthetic appeal of buildings, which is why it has been commonly used in the renovation of high-rise buildings.

Cladding materials vary widely, including metal, wood, vinyl, and composite materials. The type of cladding responsible for the rapid spread of fire at Grenfell Tower was an aluminium composite material (ACM) with a polyethelene core. The flammable nature of the ACM panels played a significant role in the tragedy, leading to calls for stricter regulations and safety standards regarding cladding materials used in construction.

How has the cladding crisis affected homeowners?

Following the Grenfell Tower fire, many flat owners were left facing safety risks, financial strain, and uncertainty.

As well as posing an immediate fire risk, flat owners found themselves facing extensive and costly remedial work and rocketing building insurance premiums. Many found themselves ‘mortgage prisoners’, unable to sell or remortgage their homes.

In February 2021, the UK government pledged over £5 billion towards remediation costs for high-rise blocks, but extensive costs continued to fall on the shoulders of individual leaseholders who had unwittingly purchased unlawfully constructed homes.

Mortgage lenders, struggling to quantify the fire risks posed by different buildings, placed severe restrictions on lending for the purchase of properties with cladding unless their owners could prove the building was safe, as evidenced by an External Wall Systems (EWS1) form. This left many homeowners in high-rise properties struggling to get a mortgage deal.

What is the Building Safety Act?

In response to the tragic Grenfell Tower tragedy, the Building Safety Act was introduced in 2022. The Act’s objective is to strengthen regulations to ensure the safety of residents in high-rise buildings and prevent similar incidents from happening in the future.

The Act finally offered a ray of hope to owners of cladding-laden properties. It sets out regulatory frameworks and funding mechanisms to identify and remediate unsafe cladding materials in eligible buildings. Essentially, qualifying leaseholders in buildings over 11m (or five storeys) can have cladding removed from their property or replaced free of charge.

The leaseholder protections offered by the Act have resulted in a rise in mortgage lending on properties with cladding issues.

Which banks agree to lend on properties with cladding?

Six major lenders are currently willing to offer mortgages on properties with cladding issues as long as certain minimum requirements are met. These lenders are Santander, Barclays, Natwest, Halifax, Nationwide Building Society and Lloyds Banking Group.

What are the conditions for a mortgage on properties with cladding?

The Royal Institution of Chartered Surveyors (RICS) has outlined the conditions on lending for affected properties.

To qualify, one of the following conditions must be met:

  1. The property will be fixed by the developer (i.e., self-remediated).
  2. The borrower is covered by a recognised Government scheme: Developer Remediation Contracts, Medium Rise Scheme, Building Safety Fund
  3. The borrower is covered by leaseholder protections under the Building Safety Act, as evidenced by a Leaseholder Deed of Certificate

For buildings under 11m (five storeys) and where one of these conditions is met, some lenders no longer require an EWS1 form, which makes the process much smoother for buyers and sellers.

Are mortgage interest rates higher on properties with cladding?

The great news for buyers is that all six high-street lenders offering mortgages for affected properties have not hiked interest rates. However, buyers are currently restricted to using one of the six lenders mentioned above, so there isn’t as much scope to shop around for a mortgage deal as you can with a standard property.

What does cladding mean for buyers?

Anyone looking to buy a property in a building with external cladding that is over 11m high must ensure that the freeholder has an appropriate ESW1 certificate for the property.

They should also confirm with the managing agents as to what other fire precautions have been put in place in the development and, importantly, who pays for these. The conveyancing solicitor acting for the purchaser should be able to confirm all of these matters as part of the conveyancing process.

What does cladding mean for sellers?

You should use a conveyancing solicitor who is experienced with properties with cladding to ensure all relevant legal and regulatory requirements are met during the selling process, including the ESW1 form and any additional reports or assessments related to cladding.

This can help mitigate risks, minimise delays, and ensure a smoother selling and mortgage process for properties with cladding.

Looking for mortgage advice on a home with cladding? Contact Goldmanread

In conclusion, while the cladding crisis has cast a shadow over the property market, there is light at the end of the tunnel. With the protections offered by the Building Safety Act and the willingness of major lenders to offer mortgages, homeowners can now approach buying and selling their homes with more ease and confidence.

Goldmanread has been helping clients buy property with cladding since it became a serious issue several years ago. We understand the challenges posed by getting a mortgage in these circumstances and are here to guide you through every step of the process.

Contact us today for personalised advice, and let us find the right mortgage deal to save you time, energy, and money.

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Clive Read

Clive Read is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.

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