Whether you’re considering buying property in the UK or selling one you already hold, it’s worth thinking through the risk that a property may be “unmortgageable.” Below is a rundown of the main factors that affect a lender’s assessment of mortgage terms and risk, which can directly or indirectly make a property difficult — or even impossible — to mortgage. The main categories are: building quality and construction, uncontrollable risks, social housing, unclear title, leasehold properties, restricted use, and property value and marketability.
Building Quality and Construction
Structural Problems
This is the most common reason a mortgage falls through. Structural issues include partial collapse, cracked walls, and Red Ash Flooring or concrete flooring that may be affected by sulfate corrosion. Between 1945 and 1970, red ash (containing sulfates) was used as fill material under concrete floor slabs, and the resulting damage to concrete floors was especially common in former mining areas.
Poor Property Condition, Unfit for Habitation
Where a property has serious quality issues — such as being run down, abandoned, or having serious unsafe conditions, or structural problems from severe damp and decay.
No Basic Living Facilities, Such as a Toilet and Bathroom
A property needs the basic facilities required to live in it, and a toilet and bathroom are essential. In some cases, heating is also a required facility for a mortgage.
Concrete-Built Properties
Most high-rise concrete buildings were built in the 1960s and 1970s, using what are now considered non-standard building materials (concrete). Most lenders will not mortgage this type of property; the same applies to timber-frame and steel-frame construction.
Uncontrollable Risks
History or Risk of Flooding or Subsidence
If a property is near a river and has a history of flooding, or carries flood risk, it may also be difficult to mortgage. You can check a property’s flood risk on the government’s website: UK flood risk checker.
Commercial or Part-Commercial Property
If a property is next to, or partly makes up, a shop or office building, it generally cannot be mortgaged. Since the financial crisis, some lenders no longer mortgage properties near “higher-risk” commercial premises such as shops, restaurants and pubs, because such properties are more exposed to “uncontrollable risks” such as noise, odor, litter and safety issues — factors that can affect the property’s value.
Japanese Knotweed or Other Invasive Plants
If a property has Japanese Knotweed or similar invasive plants growing on or around it, it likely cannot be mortgaged either. Japanese Knotweed is also known as the “house killer” — it grows extremely fast, has strong penetrating power, can grow through brick walls and concrete gaps, and can damage a building’s structure and walls. It is also very difficult to control or eradicate.
Social Housing
Former Council Property, or a Property in an Area With a High Concentration of Council/Social Housing
If a property was formerly council-owned, or sits in an area with a high concentration of council or social housing, a lender may also be reluctant to offer a mortgage.
Unclear Title
Property Not Recorded at the Land Registry
A property needs to have a formal, verifiable registration at the Land Registry to establish proper title. Otherwise, it cannot be mortgaged.
Flying Freehold
Where a property is partly connected to, or sits above/below, another property — for example, in a semi-detached house, a room above a shared passageway, or a balcony extending over a neighboring property — a mortgage may be refused for this type of property.
Leasehold Properties
A Leasehold Property With Little Remaining Term
Generally, if a property has fewer than 70 years remaining on the lease, a lender won’t consider a mortgage, because the term is too short.
Expensive Ground Rent, or a Doubling Ground-Rent Clause
The Ground Rent scandal exposed in recent years has affected many owners. For a leasehold property, if the ground-rent clause escalates in steps, or doubles within a set period, a lender may decline to mortgage that type of property. Generally, ground rent is a small, reasonable payment, but some unscrupulous developers have written clauses doubling the ground rent every 10 or 20 years — meaning a ground rent that is a few hundred pounds a year now could rise to several thousand pounds in future. After the scandal came to light, an estimated 100,000 owners were affected. Although the government has introduced relief measures, it’s important to check contract terms carefully for this kind of catch.
Restricted Use
Agricultural Occupancy Restriction
This generally applies to rural or countryside properties. An Agricultural Occupancy Condition, or Agricultural Tie, restricts a property’s occupants to agricultural and forestry workers only, with the specific rule varying somewhat by area. This type of restriction can also affect a property’s mortgageability.
Property Affected by an Urban Planning Project
If a property falls within the route of a planned new road, a lender will also assess this carefully.
Property Value and Marketability
High-Rise Flats
Many banks and building societies do not mortgage high-rise properties. What counts as “high-rise” varies by lender, generally from around 4 to 20-plus floors. This is a long-standing issue: lenders have long been doubtful about the value of high-rise property, particularly its ability to hold value during a downturn.
Eco Homes
Although good for the environment, these are not popular with mainstream lenders, mainly out of concern about marketability — most eco-homes have a fairly individual structure and fittings, such as not being connected to the standard grid and instead relying on solar power. Lenders tend to be cautious about this type of specialized property.
Low-Value Properties
Most lenders will not mortgage a property valued below £50,000.
Summary
If you need to mortgage a UK property as an overseas buyer, it’s worth checking from the outset whether your target property might have any of the issues above, to avoid running into an unexpected mortgage refusal after you’ve already bought. We also recommend consulting a professional UK mortgage broker, or having a mortgage assessment carried out.
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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Sources
- kknews.cc – 英國物業不可按揭的七大因素及17種情況 (Chinese-language explainer, cited by the original CN article)
- Which? – “Leasehold scandal, one year on: has anything really changed?”
- The Guardian – “Leasehold houses and the ground rent scandal: all you need to know”
- CommonWealth Magazine (Taiwan) – commentary on the UK leasehold/ground-rent issue (Chinese-language)
