The frustrating reality of 'proximity to commercial' in mortgage lending – Dewsbury

It comes up time and again in property valuations, especially with lenders taking an increasingly black-and-white approach.

The latest example I’m dealing with is a lifetime mortgage enquiry for an old farmhouse on the outskirts of a town. Semi-rural, two acres and, according to the owner, worth around £1m today. He bought it over 20 years ago and he currently has a £550,000 mortgage outstanding on it, which suggests it was valued decently enough in recent years to support that borrowing. Now he’s sold another property to pay it down to £172,000 and wants to look at a lifetime mortgage for the remainder – a very manageable level, you would think.

Here’s the problem. There is a garden centre nearby and a business park virtually next door. Because of this, all my initial enquiries have come back with ‘can’t lend – proximity to commercial’, effectively giving the property a nil valuation. That cannot be right. Yes, it makes the case difficult – no question – but we’re talking about a real, substantial residential property with clear market value. The blanket approach of ‘too close to commercial, therefore no lending’ feels disconnected from reality.

Affecting many properties

It’s not just farmhouses or semi-rural homes that are affected, and lifetime lenders aren’t the only culprits. We see similar issues with city centre flats, where proximity to commercial is used as a reason to restrict lending. Yet for many buyers, especially younger people, the very appeal of city centre living is being right in the middle of the action, near offices, restaurants, bars, or retail. For lenders to deem that as entirely negative for mortgage security seems counterintuitive.

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Even historically popular properties are affected. I recently received a ‘decline’ on the sort of typical just-off-town-centre terrace that has been a first-time buyer staple for many years. Across the road, land had been cleared and a supermarket with a car park had been built. Pretty handy for the ‘big shop’, you’d think. Declined for proximity to commercial.

I do have sympathy for surveyors. We recently had a meeting with one of the major national surveying firms, which told us that they would be happy to give a reasonable assessment of value, taking into account each property’s specific location and comparable evidence, but often, they are under strict instruction from lenders, and their hands are tied. This is where the frustration lies.

There must be a way of resolving this

Surely, in 2025, with all the data and local expertise available, it isn’t unreasonable to expect lenders to instruct surveyors to value properties according to their location and market realities, rather than applying a blanket ‘too close to commercial’ exclusion? Of course, properties next to industrial units, busy workshops, or major transport hubs will always have their value affected, and lending decisions should reflect that risk. But to suggest that anything in proximity to commercial is worthless is plainly untrue.

Returning to the farmhouse example, it seems likely the client will have to sell. He’s at the end of his interest-only mortgage term and, while I doubt he will get his estimate of £1m for it, I’m sure he will get a sale, and it will have value – probably far more than enough to clear the remaining £172,000 debt he is left with.

In the current environment, particularly with so many homeowners looking to restructure their finances later in life, these blanket policies risk leaving borrowers with fewer options than they deserve. People aren’t asking for the earth – they’re asking for lenders to consider fair, location-based valuations that surveyors are trained to provide, irrespective of how near they are to a hairdresser’s.