Property

The special costs of high-rise life

Jo Thornhill

Mail on Sunday

8 March 2004

HIGH-rise flats offer great views, but they also attract sky-high mortgage rates. Buyers might have to pay more than three times the average rate for a home loan - as much as 14%.

And that is if they can find a lender to give them a mortgage. Many will not consider loans for flats above the fourth or fifth floor.

This is because high-rise properties are considered to be a greater fire risk. They might also have higher maintenance costs, which has a bearing on the borrower's ability to repay a loan.

Flats in high-rise blocks suffered most in the house price slump of the early Nineties, making lenders even more wary.

But a mortgage for a high-rise home is not impossible, as parole officer Chieme Ekwem discovered. Chieme, 44, struggled for two years to find a mortgage on his £88,500 council flat on the 16th floor of a 17-storey block in Kennington, south London.

'When I started looking for a mortgage, I had no idea that it would be so difficult,' says Chieme, 44. 'I already had a deposit from Lambeth Council under the Right to Buy scheme and I only needed to borrow £50,000, but lenders turned me down many times.'

Alliance & Leicester told Chieme it could lend on a high-rise block, but it must be brick-built. Chieme's property is concrete.

Then he managed to find a smaller, specialist lender that agreed to a loan, but it wanted to charge interest at 14% - three times the best residential mortgage rates on the market.

'I had just about given up,' says Chieme, 'but then I saw an advert saying HSBC would lend on high-rise properties. I tried there and the bank approved the loan. It was such a relief.' He now pays mortgage interest of 4.74%.

Sian Lehrter, head of mortgages at HSBC, says the bank looks at applications case-bycase and it would not refuse to consider a property just because it was on the 16th floor.

But, she says, borrowers must be wary. 'We may ask for a more detailed survey or valuation for high-rise flats,' says Lehrter. 'We look at issues such as whether the lift works; the condition of shared staircases and hallway; and what sort of maintenance fees are charged.

'We are flexible and will make an independent assessment. But borrowers should also be careful. If lenders won't grant a mortgage, you have to think it might not be the right property to buy.'

As well as A&L and HSBC, Bank of Scotland, Leeds & Holbeck and Portman will consider lending on highrise flats, depending on structural quality and the valuer's comments.

Cheltenham & Gloucester, part of Lloyds TSB, and Northern Rock will lend up to the fourth floor and NatWest will lend up to the eighth.

Sally Laker, an adviser at Mortgage Intelligence in Bournemouth, says: 'Lenders will often look for a property with standard construction and market appeal. It will have to be in good condition and be in a popular location.

'New high-rise developments in central London are always looked at differently, so buyers with this type of property should not have too many problems.'

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Going up in the world

• GO to a specialist estate agent accustomed to dealing with high-rise property and ask which lenders are best to approach. Alternatively, use an independent mortgage broker.
• ASK other owner-occupier residents in the block which lenders provided their mortgage.
• LENDERS will want to know that the building is structurally sound. Also, check out how much the maintenance costs will be for the shared areas of the flat.
• MORTGAGE providers will want to be sure that any communal areas and lifts are well maintained as this affects the saleability of the flat.

©2004 Associated Newspapers Ltd. All rights reserved.

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