Nationwide are the first lender to announce they are changing their requirements for customers who purchase leasehold new build properties.
The main reason for this change is to limit the high ground rent fees being charged. The maximum starting ground rent on all new build properties the building society will lend on is 0.1% of the property value. In addition, the ground rent must be reasonable at all times during the lease term and unreasonable multipliers of ground rent doubling every 5, 10 or 15 years will not be permitted. The ground rent should be linked to a verified index, such as the Retail Price Index (RPI).
Alongside the changes Nationwide has made, they’ve also made changes to tackle the term of the Lease for the property being purchased. From 11 May 2017, Nationwide have stated the minimum acceptable lease term for flats is 125 years and 250 years for houses.
The changes being made by Nationwide may impact on the developers selling leasehold houses and may put pressure on them to review this practice. They will also help to stop developers from making more profit by selling the freehold to the property owner a few years after the purchase of the property, or from selling the freehold to a third party.
It will also limit the excessive ground rents being paid by flat owners.
Nationwide is the world’s largest building society and one of the top three mortgage providers in the UK. We anticipate that other UK mortgage lenders will follow in their footsteps with these sorts of requirements shortly.
If you need help with buying a new build, speak to one of the team on 0117 926 4121 or make a free online enquiry.