The lender said around one-and-a-half million properties, equivalent to 6% of the UK’s 28 million residential homes, may struggle to secure finance from many high street banks.
It said factors including their construction type, condition and location inhibit standard mortgage funding.
Examples include thatched cottages, high-rise apartments, homes located close to commercial premises and properties without functioning kitchens or bathrooms.
Millions of properties fail Decent Home Standard
The report showed that 323,000 English homes lacked basic modern facilities.
£2.5m paid to help broker clients benefit from greener homes
Sponsored by Halifax Intermediaries
Overall, 3.5 million houses failed to meet the Decent Home Standard, government legislation that ensures homes are acceptably habitable.
Issues such as subsidence, rot and damp continue to affect mortgage applications, as issues only come to light upon valuations. Furthermore, Japanese knotweed was found to affect nearly 1.4 million UK homes.
Buyers keen to proceed
Together’s research found there remains notable appetite among buyers for properties considered difficult to mortgage.
Among those who had purchased or seriously considered purchasing such a property, 44% said the main attraction was affordability and value for money compared to a traditional home.
Some 31% said they were seeking a renovation or restoration project, while 28% saw an opportunity to add value and sell the property for a profit in the future.
Some 31% who said they were aware the purchase would be difficult believed it would be worthwhile. Meanwhile, 21% said the rewards outweighed the risks.
The research also pointed to investment motivations, as 28% of buyers cited lower purchase prices as the biggest attraction.
That figure rose to 32% among those purchasing the property as their main residence.
For buy-to-let (BTL) investors, rental income potential was the influencing appeal, cited by 35% of respondents.
More homes need to be considered mortgageable
However, Together found that 21% of respondents had already experienced a mortgage application rejection. Plus, 32% said they had access to a much smaller pool of lenders willing to consider their application.
The report found that 4378 buildings with cladding were in need of remediation, with only 20% of those properties in active remediation.
Properties that fall outside mainstream lending criteria are heavily concentrated in certain parts of the UK, particularly major urban areas with older housing stock.
For example, Birmingham alone had over 193,000 with poor or very poor wall efficiency. Leeds had over 112,000.
Ryan Etchells, chief commercial officer at Together, said: “One of the less visible challenges facing the UK property market is the sheer number of properties that mainstream lenders are reluctant to finance.”
He added: “That means a significant number of homes are effectively out of reach for ordinary buyers. While they don’t feature in official housing shortage figures, they represent part of the wider supply problem and highlight the scale of investment needed to bring more homes back into the ‘mortgageable’ market.”
Etchells said there was strong buyer demand for such properties, but many borrowers remained unaware of alternative finance options available to them.
