Buyers may now be able to secure mortgages on flats in blocks above 5 stories (or 11 metres) high, as long as remediation plans have been agreed. These remediation works are to be funded by either the government, developer or covered by the leaseholder protections in the Building Safety Act.
As I see it, this is most definitely a step in the right direction, but we need to look at what this really means for buyers and sellers.
The 6 banks mentioned above have all indicated variations in their policies and lending criteria:
- Santander - will consider mortgage applications in England for properties in building "irrespective of the building's height or whether remediation work has commenced, provided the correct evidence is shared." It will not requrie an EWS1 form "unless specifically requested.
- HSBC - will now consider lending on flats that have failed their EWS1 assessment, but may still require an EWS1 form in certain circumstances as part of the valuation process.
- Nationwide - if a property has an EWS1 form with a rating of A3 or B2, it would need "confirmation that there is a clear path to the building being remediated," an outline of the cost of the works and who is paying for them.
- Lloyds Banking Group - it said it updated its position on 19th December, ahead of other banks. It will no longer require an EWS1 form to "progress applications" for properties in England that are in buildings five stories or higher.
- Barclays - from the 9th of January 2023 it began lending on properties where a recognised remediation scheme is in place. A spokesperson said "We are pleased to announce new policy changes to support lending on properties impacted by fire safety issues. As a responsible lender, we will monitor our policies and processes to ensure we continue to help customers reach their homeownership goals."
- NatWest - confirmed it would offer mortgages to buildings with cladding, especially those with A3 or B2 ratings. It said it would lend based on a new after repairs figure confirmed by a valuer on a valuation report before remediation work is completed.
So what is an EWS1 form and how are they rated?
The EWS1 form was created by RICS (Royal Institute of Chartered Surveyors) in an attempt to give surveyors a means to assess the risk from external walls in the aftermath of the tragic Grenfell Tower fire.
Poor government guidance and non-prescriptive regulations, combined with non-compliance by builders and poor enforcement by inspectors in the decades before Grenfell, resulted in tens of thousands of tall buildings with dangerous materials.
Buildings below 18 metres were subject to no limits on combustible materials according to official government guidance - a position that was only revised last year.
This is what the EWS1 ratings mean, from best to worst:
- A1 - The highest rating a building can have. This means there are no attachments whose construction includes significant quantities of combustible materials.
- A2 - There is an appropriate risk assessment of the attachments. This confirms that no remedial works are needed.
- A3 - Where neither of the above two options apply, there may be potential costs of remedial works to attachments such as balconies.
- B1 - Surveyors conclude that in their view, the fire risk is sufficiently low that no remedial works are required.
- B2 - The lowest rating. It means that the external wall contains combustible materials and remedial work is required to make it safe.
With lending now available with variable requirements, what does this mean for buyers and sellers?
- It's a baby step in the right direction, but variations in policies mean there is too much ambiguity around the topic.
- It may prove very frustrating and a lengthy process for sellers to achieve the plan for remediation works.
- Buyers have to be happy to take on the protential nuisance of building works whist classing issues are being rectified.
- Buyers run the risk of spending money on the services of solicitors to get close to the finish line for banks to potentially pull the mortgage product
