Embracing change: our new approach to EWS1 ratings for mortgage lending in England
In the wake of the Grenfell Tower tragedy, the UK's building and lending industries have undergone significant transformations. The event not only highlighted the importance of building safety but also led to widespread changes in mortgage lending, especially for flats.
The Grenfell Tower disaster in 2017 was a turning point in the UK's approach to building safety, where mortgage lenders, including us, adopted stricter lending criteria for flats, particularly focusing on fire safety assessments. This cautious approach, while necessary for safety, inadvertently made it more challenging for many living in flats to secure mortgages or sell their properties.
To address these challenges, the EWS1 (External Wall Fire Review) process was introduced. Developed through industry collaboration, this certification aimed to provide clarity on the safety of building exteriors. The EWS1 form, a key part of this process, evaluates the fire risk posed by external wall systems. Initially, our policy only accepted flats with EWS1 ratings of A1, A2, or B1, reflecting a lower risk.
Expanding our mortgage lending policy
At Skipton Building Society, we understand the impact these changes have had on homeowners and prospective buyers. Recognising the evolving landscape and the need to support our members and wider society, we are pleased to announce we’ve revised our policy on mortgages for flats in England. We now accept flats with EWS1 ratings of A3 and B2, expanding beyond the previous limitations of A1, A2, and B1 ratings. This means flats requiring remedial works will now be considered by Skipton.
This is subject to identifying the security block is to be remediated through funding schemes specifically set up by the government or developer to ensure the cost of remediation does not fall to leaseholders.
EWS1 ratings and what they mean
- A1 - There is no cladding that contains significant quantities of combustible material.
- A2 - A risk assessment of cladding has taken place and no remedial works are required.
- A3 - Cladding is unlikely to support combustion but remedial works may still be needed.
- B1 - The fire risk is low enough that remedial works are not required.
- B2 - The fire risk is high enough to require remedial work.
Why are we not offering it in Scotland and Wales?
The Building Safety Act legislation and related government schemes cover buildings in England only. The devolved governments are currently considering similar schemes, once the situation in Scotland and Wales becomes clearer, we will have a review.
Risk considerations for brokers and customers
- Within the Building Safety Act, there are requirements that need to be met to qualify for leaseholder protections. Brokers should explore if customers meet these requirements.
- Whilst the Building Safety Act may give some comfort in mitigating the risk of additional remediation costs being passed on to customers, there is still uncertainty as to when the remediation works will be completed. Brokers should clarify the potential associated risks with customers.
Looking Ahead
At Skipton Building Society, we are dedicated to adapting and evolving in response to industry changes while maintaining our commitment to safety and responsible lending. Our updated policy is more than just a change in criteria; it's a reflection of our commitment to supporting our customers through their homeownership journey.
The journey since the Grenfell Tower tragedy has been one of learning, adaptation, and collaboration. By updating our mortgage lending policy to accept flats with any EWS1 rating, we are taking a step forward in supporting our customers and responding to the evolving needs of the housing market. We believe this change will bring positive impacts to many, and we remain committed to ensuring safety and demonstrate our commitment of helping people into homes, supporting homeownership dreams.
This initiative is aimed at providing additional support to those affected by the cladding crisis and contributes towards the opening-up of the lending market for flats. This is a result of collaborative work between, Skipton, Department for Levelling Up for Housing and Communities (DLUHC) and industry experts.