SPF Private Clients' Mark Harris warns that if service charges breach 1% of a property’s value, a lender "may decide not to lend".
20th Jul 20261 18,273 2 minutes read Myra Butterworth
Flats are becoming increasingly unmortgageable due to soaring service charges, it has been claimed.
Several banks are refusing to lend on flats where the annual service charge tops 1% of a property’s value.
Lenders had previously set the threshold at a higher 2%, but fear high charges would make a repossessed flat harder to sell.
Red lineMark Harris, chief executive of mortgage broker SPF Private Clients, explains to The Neg: “While the level does vary between lenders, the 1% red line seems to be a good rule of thumb and if service charges breach this proportion of the property’s value, the lender may decide not to lend.
“Review periods will play a factor in the decision, as will ground rent although legislation changes could make the latter irrelevant.
“Lenders will be concerned about unknown costs and how this will impact future affordability if service charges are hiked further.
“It’s important that borrowers seek advice if a service charge seems overly onerous, particularly if they require a relatively high loan-to-value mortgage.”
The 1% red line seems to be a good rule of thumb and if service charges breach this proportion of the property’s value, the lender may decide not to lend.”
The warning follows the Government announcing this week that it was introducing new measures to protect leaseholders.
It promised that the measures would come into force “as soon as possible from 2027”.
Meanwhile, leaseholders continue to face soaring service charges. Some 37% of flats carried a service charge above 1% of value in 2025, Hamptons data shows – up from 28% a decade ago.
Trapped flatownersThis week, research by Propertymark revealed how flatowners remain trapped by rising costs.
It found that 86% of leaseholders saw an increase in service charges in the past 24 months, 62% of those said it increase by more than 21%, while more than a quarter said it increased by more than 60%.
In response to the findings, Katie Kendrick OBE, Founder of the National Leasehold Campaign, says: “Leasehold remains a life sentence. Despite nearly a decade of commitments, progress has been too slow, too limited, and too easily diluted.
“As a result, too many leaseholders remain trapped – unable to sell, unable to move, and facing costs they cannot afford.”
She adds: “This is not just a failure for leaseholders – it is a failure of the housing market.”
Tagsleasehold flats mortgages Savills Private Finance 20th Jul 20261 18,273 2 minutes read Myra Butterworth Share Facebook X LinkedIn Share via Email