British banks offer mortgages in apartments with cladding

Britain’s six biggest banks will start lending on properties with cladding 11 meters or higher from January, making it easier for homeowners to sell up after years of uncertainty following the 2017 Grenfell Tower disaster.

From 9 January 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 evidence that cladding work will be covered by developers, tenant protection or a recognized government scheme.

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

“Lenders are committed to ensuring that those looking to buy or relocate flats affected by building safety issues will be able to access mortgages, which will restore confidence in the market,” industry body UK Finance said.

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 property with cladding.

An investigation into the Grenfell disaster revealed widespread failures in the construction of high-rise buildings, prompting mortgage lenders to withdraw from the market and bringing trade in affected homes to a standstill.

While tall tower blocks with similar cladding to Grenfell were the original focus of the government’s investigation, in January 2020 ministers directed that multi-storey residential buildings with multiple occupants, regardless of height, should be assessed for fire risk.

Around 840,000 flats were affected according to the government’s analysis, effectively rendering them unsellable until they had confirmed 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 responsible for the costs 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 £10 billion.

The government estimates that a forthcoming building safety levy on developers of residential buildings will raise £3 billion over the next decade.

Jas Singh, managing director of consumer lending at Lloyds, the UK’s biggest mortgage lender, said “the move will really simplify things for those buying homes in properties of five storeys or higher”.

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

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

HSBC UK said the changes “will provide valuers with improved guidance to enable lending for terraced properties, while providing more clarity and certainty for those who live or wish to buy a property in a terraced block”.

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