Which banks now lend on flats with cladding problems?

In the aftermath of the infamous Grenfell Tower tragedy, UK banks were hesitant to provide loans for flats with cladding due to concerns about safety risks and the potential expenses associated with the remediation procedures. This has now changed. Recently, a shift has been seen in the stance of certain banks. A select few are now making mortgages available for these properties, subject to certain criteria and certainty that work will be done. This change recommends reassessing risk factors and easing restrictions in the lending processes for flats with cladding issues.

A few major UK banks now plan to provide mortgages with cladding for medium and high-rise properties. These are Virgin Money, TSB and Skipton, Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander. As a leading professional Managing Agent, covering England and Wales chartered surveying practice The Ringley Group has been campaigning for this for some time.

What criteria are assessed when banks consider lending on property in a block with cladding?

To qualify for a mortgage, property owners must demonstrate that the developer, leaseholder, or a government program will cover any unsafe cladding. In reality, this means a well-progressed building safety application or a developer who is solvent and has signed the government's Developer Remediation Contract (DRC) in England and the Self Remediation Contract (SRC) in Wales. This crucial move is a very progressive and decisive one as it aims to restart lending and provide relief to buyers and innocent leaseholders who have been trapped in their homes. Affected parties have dealt with prolonged apprehensions and struggles in selling their homes for no fault of their own.

Can you get a mortgage or remortgage on a property in a block with cladding in Wales?

Undoubtedly, this is a hugely positive development, but there are apprehensions about the practical application of these changes. As a Managing Agent with over 1,000 properties in the Cardiff Bay area in Wales, we are aware of even one property that has, yet, to experience a positive outcome from any of the named lenders.

We at The Ringley Group as a Managing Agent in both Wales and England remain concerned about how stringent the assessment process will be given the huge negative publicity these properties attracted during the mishap. We also have concerns about the effects on property values and considerations regarding the expenses associated with building insurance. We are acutely aware of the number of repossessions on affected blocks both as a Managing Agent in England and Wales.

These concerns underline the need for careful monitoring and effective implementation of the procedures so that the challenges that arise in the process can be effectively dealt with. In 2023, we lobbied Michael Gove for Wales, which culminated in a meeting between Ringley Wales and West Block and Property Management and the Global Head of Valuation Standards of the RICS. The result is to extend the English valuation guidance that RICS registered valuers should treat property valuations for apartments that have certainty of cladding remediation due to a well-progressed building safety application or a developer who is solvent and has signed the government's Developer Remediation Contract (DRC) in England and the Self Remediation Contract (SRC) in Wales, as without cladding impediment. As a prominent Blocks Property Managing Agent in Wales 'hurray', we thought, flats may start selling for sensible prices again. Yet the next challenge was, irrespective of the valuer, the market wouldn’t move until each mortgage lender updated their internal lending policy. We went back to the RICS Global Head of Valuation Standards and duly a meeting with lending associations governance bodies was called. Therefore, we hope that slowly this will filter down to actual transactions.

The post-Grenfell backstory

In the aftermath of the tragic Grenfell Tower fire in 2017, there was a unanimous understanding among the UK Government, the property industry, and residents that removing unsafe cladding was imperative. However, the challenges they faced were enormous. Many buildings required remediation, and there was and still is a huge scarcity of qualified specialists to undertake the work. This resulted in substantial delays in addressing the issue.

Grenfell has taken its toll on the mental health of hundreds of thousands of leaseholders

During this period of uncertainty, leaseholders were further stressed by the uncertainty about the costs of removing and replacing the cladding. Some remediation estimates soared into the tens of thousands of pounds per flat, making the situation more complex. As per recent developments, lenders are open to reviewing mortgage applications for properties located in buildings in England that are at least 11 meters tall or have five or more storeys, even if they have building safety concerns.

What lending or mortgage conditions do lenders make if a building has cladding on it?

There is no precondition that the building should have undergone repairs as long as

• The remediation is actively addressed by developers.
• It falls under an officially recognised government program.
• It is safeguarded by the measures outlined for leaseholders in the Building Safety Act.

What percentage of UK Banks will lend on properties in buildings with cladding?

With major banks joining others in the commitment to offer mortgages for such flats, more than 75 percent of the mortgage lenders in the UK are now on board for the task. The lenders which the UK government says cover 75 percent of the mortgage market who will consider clad buildings favourably are: Virgin Money, TSB, Skipton, Barclays, HSBC, Lloyds, Nationwide, NatWest, and Santander. Lee Rowley, minister for building safety, has responded to the lenders' move.

I am extremely pleased to see lenders doing the right thing and supporting leaseholders stuck in homes with building safety defects. This is a further sign of the market's confidence in the solutions that we have put in place to protect leaseholders.

The government has asserted that they have implemented measures to shield leaseholders from the burden of remediation costs since the Grenfell Tower tragedy in 2017. The enactment of the Building Safety Act is one such crucial measure. Under the provisions of the Act, the responsibility for addressing unsafe cladding lies with those accountable for its presence, not with the leaseholders. Hence, leaseholders must not be burdened with the associated expenses

The Road Ahead for Cladding-Affected Properties

As more banks begin to offer mortgages for properties affected by cladding, the landscape of property ownership and development is slowly shifting. However, the journey is far from over. While many banks have started to adjust their lending policies, there remain ongoing challenges regarding the pace of remediation work, property valuations, and the long-term impact on housing markets. For homeowners and developers alike, the need for clear communication, continued government support, and efficient implementation of safety measures will be crucial in securing a smooth transition for cladding-affected buildings into the mortgage lending system.