(posted 7910 days ago)Independent 24 August 2002
Q I was interested in your reader's query (Questions of Cash, 10 August) about mortgages on local authority tower blocks. My experience is that none of your suggested lenders, or any others, is sympathetic. I have the "right to buy" a flat in a 20-storey block in Kennington in central London.
My mortgage would be substantially less than my rent. I need to borrow £24,500 on a property with a council valuation of £62,500. Local estate agents say on the open market it could sell to a cash buyer. I thought HSBC still gave loans on these properties, so I paid them £102 for a valuation in which the valuer recommended the bank not to lend because "the majority of lenders would not accept the property for mortgage purposes".
This is Catch-22. Lenders refuse to lend saying there is no market, because lenders refuse to lend. I bet buyers of the £490,000 three- bedroom apartments in the private 20-storey redeveloped office block 500 metres from mine will not have trouble getting a mortgage, nor buyers in the Barbican. I think HSBC and the valuer should have said immediately there was no chance and not taken my money.
RB, Kennington
A The key to getting a mortgage on a tower-block flat is the lenders' perception of resaleability in the event of borrower default. Although lenders themselves help determine resaleability, that does not change this. Ray Boulger, of mortgage broker Charcol, says: "Although your reader says, 'Its location is perfect', Kennington is not generally considered a prime location. He is correct that getting a mortgage on a Barbican flat is not a problem, despite the development not meeting any lender's stated criteria. I am also sure he would win his bet that buyers of the local £490,000 apartments won't have trouble getting a mortgage. This development could help him get a mortgage, because it will eventually enhance the overall desirability of his area and influence favourably a valuer's opinion about his flat's saleability."
Mr Boulger says a mortgage broker may have greater success obtaining a mortgage. HSBC says it has no general principle of not lending on a high-rise property and lending decisions are taken from the valuer's report, so it could not have rejected your application without seeing the valuer's report.