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Big six cladding announcement ‘great news’ but long way to go – analysis

  • 22/12/2022
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Big six cladding announcement ‘great news’ but long way to go – analysis
Brokers have widely welcomed the announcement earlier this week that the six largest mortgage lenders will lend on properties needing cladding remediation from the start of next year, but this should be the first step on the road to help impacted buyers and sellers.

Earlier this week, Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Natwest and Santander said they would lend properties needing cladding remediation if there was evidence of self-remediation, coverage from government schemes or protections from the Building Safety Act.

Previously lenders had lent on flats, in some cases not needing an EWS1 form, but for buildings needing remediation there have been barriers for those looking to buy or sell resulting in delays in mortgage applications proceeding.

Tom Collier, director at Advantage FS, said the “near-blanket requirement for an EWS1 sign-off in mortgage lending on clad buildings” had to led to around two million borrowers being unable refinance, leading to “cladding prisoners”.

He added that the EWS1 form sign-off process could also be “expensive” and lead to management firms stalling in arranging them, as they anticipated government funding coming through if the repair works bill does not fall to the leaseholder.

Collier said Santander – who already showed flexibility towards clad properties – only accounted for 11 per cent of the 2021 market, but the big six lenders made up around 72 per cent of UK mortgage lending, marking a big step forward.

“Assuming the requirements to be met are reasonable, objective and transparent, then this reformed approach to lending against clad properties could free so many from their torment. This could be the catalyst ‘cladding mortgage prisoners’ have been waiting for,” he noted.

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said it was “great news for those who have been in limbo” since the Grenfell tragedy brought the cladding issue to light.

“It’s not an ideal solution by any means and there are still those with issues that this will not resolve, plus there will be many unanswered questions, but it’s a positive move for a large group of people who have seen nothing but buck-passing for years,” he added.

Jonathan Burridge, founding adviser at We Are Money, said “more lenders means more choice” and the fact they were larger players was “reassuring for both owners and buyers”.

“Choice means properties affected with the cladding issues can now be marketable to all buyers, not just those with cash…[But] so, much will depend upon the detail. But things are looking far more positive at present,” he added.

Amit Patel, adviser at Trinity Financial, said this was “great news for both buyers and sellers as this has been a huge issue for the past couple of years”.

“This should bring much-needed confidence back into the market,” he added.


Lenders may still be cautious and ‘more needs to be done’

Samuel Gee, director at Manning Gee Investments, said EWS1 forms, or the lack of them, had “caused sellers misery through no fault of their own, and frustration for buyers”.

He said the announcement would ease that to an extent but warned lenders would “likely still be very cautious with values correspondingly affected”.

Gee continued: “This will benefit sellers who have been desperate to sell but buyers should be made aware that without the correct certificates, these flats make an unattractive purchase.

“No doubt surveyors will also be cautious in their valuations with the zero-value trend for mortgage purposes remaining for some time. We’ve seen one mainstream lender take a pragmatic view this year, and with huge effort have achieved an offer and completion on a flat without an EWS1, but it took six months of work behind the scenes to achieve it,” he added.

Emma Jones, managing director at When the Bank Says No, said it was “about time” lenders made changes but the broker community felt that “more needs to be done”.

“The borrowers purchased these properties without knowing any issues would arise on getting a mortgage or the impact when trying to sell. If the work is going to be done and guarantees are provided for this by the leaseholder then that should be enough for the property to be mortgaged,” she said.

Jones added that she had her “fingers crossed” other lenders would follow suit and further steps would be taken next year to help homeowners.

Chris Sykes, technical director at Private Finance, said it was positive announcement but there wasn’t “formal guidance” from lenders yet.

He noted: “I’ve reached out to a few lenders and have had the response they will no longer require it but if a valuer had any concerns themselves around cladding they still can request it before providing a valuation, so there is more guidance that needs to be given. Commitment is great, I’m not sure if it is physically written into policy and when we will be given formal guidance around it.

“I can think of many clients this will be extremely helpful for where they have works scheduled or are midway through works but it is a year long process. If lenders do commit to lending this will release a lot of mortgage prisoners.”

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