At the time, a handful of lenders committed to adapting their stance for lower properties according to the new guidance but no official changes have been made since.
So this week, Mortgage Solutions is asking: Have you noticed any change in lender attitude towards low-rise buildings or do they still seem hesitant to lend without an EWS1 form?
I don’t think anyone knows the answer to this as such – even speaking to the lenders, many are choosing to follow RICS guidance over the government.
Some of the big lenders are still asking for the form and many have said they’re expecting the government could change their minds again. In the past, there have been updates, only for the guidance to change once lenders adapted.
In case they want to sell a portfolio of mortgages which consists of flats with cladding in the future, they want a report to confirm the property is safe. Just scrapping it based on government advice doesn’t seem like a very good idea for them at the moment.
One lender was saying freeholders and developers are getting the forms pre-empting any requirements, but others were saying they think tenants and flat owners are handling it themselves, then forwarding it to management agents to be signed. This is because there hasn’t been any urgency to get this done.
Overall, lenders are taking fewer questions and accepting more applications from those in flats, but if there is any cladding present, they ask for the report.
At the same time, some of these homeowners know they won’t be able to refinance until checks are done so there’s no point in shopping around and asking which lenders won’t need the report because most will.
We’re not getting as many calls as we previously did about this either.
There was a time not that long ago where it seemed every case had an issue with the EWS1 form and lenders were inundated with applications and there weren’t enough inspectors to sign everything off. It has slowed down and doesn’t seem to come up as much.
There hasn’t been much change. Lenders aren’t following the new stance because the property is their security. The risk on their part in most cases is far more than our clients are because the level of lending is generally more than our clients’ equity.
The conversations with developers about how any action will happen, such as who will pay for remediation, is all still in the pipeline. Nothing has been ironed out.
Lenders are reliant on valuer’s comments and they’ll only lend based on what a valuer says, which makes it hard without an EWS1 to cover them. They won’t recommend a lender to lend if they don’t have documented evidence to say it’s safe.
With regards to whether there’ll be any changes in attitude soon, business development managers just agree with valuer comments and say if valuers recommend it, that’s our policy.
I don’t deal with many clients who have cladding issues anymore but recently, I did have a case come through.
The valuer said he thought there was cladding on the roof but he couldn’t check, so the lender refused to lend. But on a high-rise flat, if there’s cladding on the roof, the valuer would never be able to check that. But the minute he says he thinks there’s cladding, the lender says ‘no sorry’.
With the recent announcement of the government scrapping the EWS1 forms below 18 metres, you would hope to see a change in lender stance and an ease on the requirements to offer a mortgage on these properties, at least.
You’d be wrong.
The only significant change in the industry when it comes to the cladding situation was the announcement of guaranteed funding for removal of dangerous cladding in all properties over 18 metres.
We are still seeing the need for proof of certificates needed to show that work has been completed to remediate the issues that saw the tragedy at Grenfell unfold.
Some lenders have moved to a basis that they will require the certificate, based on the valuer’s comments. This doesn’t give much confidence when we have a history of valuers being overly cautious on the properties they assess, so most brokers will more than likely take this as a need for the form on all cases.
This is understandable though because if anything happens in the future, it’ll be on the valuer.
Only a few lenders will accept a property with cladding. For their level of risk and homeowner safety, it makes sense that they will need the necessary documentation for a property before they lend.
As well as building regulations that were in place at the time, this would never have happened if the government didn’t take fire safety checks on buildings away from the fire brigade and transfer it to private firms. Fire safety officials probably would have been able to see that the cladding was unsafe earlier, but unfortunately it took a tragedy to see change.
Santander is a little more lenient as they require a headed letter from the building owner or management company confirming whether work is needed or complete. However, for now, before submitting that application, it would be best to check that all forms are in place.
Overall, I think lenders are well within their rights to refuse to lend, if I’m honest, because I also wouldn’t suggest someone buy a property if they knew it had cladding.