Following the Grenfell disaster in 2017 there have been a number of regulatory changes - and rightly so - to ensure safety for residents. For example, the Government banned combustible materials for residential buildings over 18 metres.
One consequence of changes in the regulatory environment has been that mortgage lenders have begun asking for more detailed technical information when it comes to assessing the value of a property in a high rise. When dealing with a remortgage application, they are increasingly asking for information relation to the construction of the building, particularly about the external facades of buildings that are 18 meters and over.
Lenders typically want to know more about the materials used and how the façade was put together as well as the certification of the methods taken and the procedures that were followed in construction.
These requirements are being applied to all properties over 18 metres in height - not only those buildings constructed with the now banned aluminium composite material (ACM) cladding found at Grenfell Tower.
Obtaining an up-to-date fire risk assessment (FRA) under the Regulatory Reform (Fire Safety) Order 2005 is another requirement, and a necessary one for lenders who won’t budge without one, in many cases.
Valuers are requesting these reports in order to sign of lending however not all freeholders have this report which means lenders are declining applications. We are finding that in some cases, no mortgage provider will get involved without reassurance it meets current cladding and insulation safety standards.The lack of such available, detailed information about these buildings to be provided by local authorities is a growing problem, it seems. At a new-build estate in East London, surveyors reportedly valued a £685,000 flat bought two years ago at £0 until the local council could prove its compliance by signing a form stating it meets new safety standards.
Not only do residents who are unable to obtain such documents have the worry of whether their home is safe, they are faced with not being able to secure a cheap mortgage and having to pay way over the odds if they end up on the standard variable rate (SVR) which on average is around 5%. It also means that should they wish to sell, they face difficulty - or an impossible task.
The Government needs to help this group of homeowners by providing a moratorium for a certain period so people don’t get trapped on the SVR, paying double the amount of interest, in some cases.
It should consider expediting the requirements of freeholders needing to obtain the reports and avoid financial hardship for many families.
