Lender announces crackdown on mortgages for leaseholds

A major lender is cracking down on loans for new-build leaseholds.

From next week, Nationwide will impose stricter criteria.

Leases will have to be at least 125 years for flats and 250 years for houses.

Ground rents must equate to no more than 0.1% of the property value and must be “reasonable at all times during the lease term”.

It will not allow “unreasonable multipliers” where, for example, ground rents double every ten or 15 years.

The building society is acting after negative publicity about developers who build new homes as leasehold properties, and then lucratively sell the freeholds to third parties who in turn see them as investments to cash in on.

Robert Stevens, head of property risk, data and strategy at Nationwide, said: “We are doing this to address the practice of using leasehold tenure where this is unnecessary, particularly for new-build houses, and to ensure that onerous leasehold terms, including ground rents, are properly considered and controlled.”

The changes in criteria will not apply to second-hand properties.

Bethany Rudolf of the Conveyancing Association said: “We applaud Nationwide for delivering these leasehold policy changes and hope other lenders will follow suit.

“This is particularly helpful while the Government is in a purdah situation and therefore unable to deal with the growing issues surrounding leasehold until post-General Election.”

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Written by: Houseladder