Mortgage refused because of stone cladding on new-build

katemonkey

Hi all,

I am in the process of purchasing a shared ownership property - this has been a very long-winded process so far. After overcoming many hurdles, it seems the latest snag has been the mortgage approval.

My mortgage broker put in an application with Santander for the mortgage on the property. All was seeming to progress but then Santander came back to say that because the building had cladding, they required the following:

1. DCLG screening test results (this will highlight if cladding is present)
If cladding confirmed then they require
2. Fire risk assessment (must post date the screening test above)
3. Local fire authority confirmation of recommendations and confirmation of recommendations being implemented
4. Freeholder or management agent confirmation of proposed remedial works along with timeframes, costs per flat and who is liable for the costs

After forwarding this information on to the property agent and vendor, they simply replied with the following:

The property has not had a DCLG Screening Test since the exterior cladding is not a form of ACM. The cladding is a Reconstituted Stone Cladding by Petrarch.

My mortgage broker has now referred me to a specialist finance company who deal with non-standard building construction mortgages. This seems absolutely absurd to me as the cladding is not Aluminium Composite - it is a relatively new build, about 7 years old - I would not consider it non-standard construction although I don't know much about this.

Would anyone be able to give me some perspective on this and what route I should take?

kingstreet

Was the explanation forwarded to the surveyor who did the Santander mortgage report & valuation?

katemonkey

Hi kingstreet!

No I don't believe it was - after the HA came back with the response, my broker simply referred me to the specialist financers. I don't feel like this should be a 'special' case mortgage though.

middleclassbutpoor

Sounds wrong does that to me.

Surely the response should have been sent back to the Lender for them to refer it back to the surveyor to confirm whether the above would still be required.

It doesn't sound like the underlying property construction is being questioned.

Understandably given the recent events around cladding and fire, it is something the lenders are probably more likely to want to ensure is up to standard. If there is no fire risk, I wouldn't imagine it being an issue.

I would stop your broker doing anything until they have confirmed Santander are not going to accept.

Are they working on commission only by any chance?

katemonkey

Thanks for your reply, middleclassbutpoor!

No my mortgage broker is not on commission - I’ve paid a flat rate. What is your thought on this?


What do you think my next steps are? As a first time buyer, I’m completely daunted by all of this and not sure who to trust or where to go!

middleclassbutpoor

Have you paid the broker anything so far?

I don't want to detract from your issue by going into views on how brokers charge but my concerns are;

They have referred you on because they can earn more money as they are commission only and therefore they are being driven by what they earn rather than working in your interests.

If they have charged you a fee and regardless of the outcome they get paid - so now by passing you on to someone else, they can earn either again or do no more work whilst still being paid.

The point I would be checking out is speaking to your broker and asking why they have referred you - i.e. have they sent the response back to santander or not?

Always very difficult to say what has gone on from a forum but from what you know and have said, it sounds as though they haven't concluded that Santander will/won't lend.

Do you know how much experience the broker you have has?

katemonkey

Thanks so much for the response.

I paid the broker a flat fee before they would send my mortgage application - they are a reputable firm although I am cautious and aware as to the possible motives they may have for referring my case as you mentioned. The broker in question is fairly young - which doesn’t necessarily mean inexperienced, but it might do in this case

Reviewing the email correspondence again now, it doesn’t appear that Santander has outright rejected the application, but rather they want the screening test result report on the cladding before considering it further. The hitch now is that there is no screening report - as the housing association have said, because the cladding is not ACM, they have no requirement to perform the screening test on the block. It seems to all be going in circles!

middleclassbutpoor

Surely common sense would state that the broker needs to send the response back to Santander explaining why the HA cannot supply the reports required. They should then be given a chance to review this and to make a decision on whether to lend or not.

Sounds as though your broker is confusing the cladding with the construction type. I would be asking them to complete this before moving you on.

katemonkey

Thank you for the advice and direction! I will do this and let you know the outcome

middleclassbutpoor

No probs, I have just been reading through their lending criteria - nothing jumps out to me around cladding being a blocker.

All you're doing is asking for Santander to confirm that as the cladding doesn't need a fire safety certificate then is this going to cause an issue still. They will probably have to refer back to the original surveyor and get direction from them.

Hopefully just a case of a misunderstanding by your broker. If they say no then it's at this point you look to see what alternate options there are.

In terms of paying for advice -

I would never pay a flat fee to a broker in the way you have - application stage is too soon imo as a consumer but I guess it is better for them to ensure the research gets paid for regardless of the outcome of the application, which may or may not be your fault.

If you do this again- I would in your shoes probably look for a broker who charges a reasonable fee (around £600-£750) and will offset the commission/proc fee that they receive from the lender which should reduce the amount you actually pay out of pocket. I would also add into this that they are truly Whole of Market/Independent in the sense that they would consider lenders who won't normally accept broker business such as HSBC.

I would only pay the fee on obtaining a mortgage offer (as that is when the broker has actually done their job).

You could look a no fee brokers but unless you have a good understanding but you are not likely to get the best deal if they can't be paid for recommending products that they cannot get paid for recommending.

Let us know how you get on.

GinaBrooks

Hey Katemonkey! I just came across this thread and wondered how you got on with your mortgage? I had almost the same issue a couple of months ago with Natwest declining a brand new build due to cladding. Similar to you, the property didn’t have ACM cladding but did have a Class 0 cladding (gebrik brick slip) which after a lot of reading seems to be a weaker fire retardant cladding type. Anyway, Natwest refused to give me any information on what the issue was despite charging me for the survey and asked for very similar information Santander requested in your case. I’m still chasing my tail months on.

I really hope you were able to resolve this and enjoying your new home 😊 Be great to hear how you got on!