The Bank considers risk of a financial collapse from cladding scandal

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    The Bank considers risk of a financial collapse from cladding scandal

    An excellent but worrying article appeared in yesterdays Sunday Times, written by Martina Lees , Senior Property Writer, which has potential ramifications across the entire property sector if not addressed . I have been aware of the attitude of lenders towards such developments and indeed none have been sold or refinanced since 2019 this is a matter which might cause lenders to begin a reassessment of their lending policies in order to ensure that the BoE doesn't toughen up the Capital Adequacy provisions to safeguard the lending balance sheet.

    "The Bank of England is assessing whether Britain's building safety scandal could cause a new financial crisis. Its Prudential Regulation Authority (PRA), which monitors risks across the financial system, has questioned mortgage-lenders on their exposure to leasehold fiats and blocks with fire risks.

    Analysts at the bank are understood to be concerned about the scandal's effect on property values. A collapse in house prices triggered the global financial crisis in 2007.

    The bank is asking lenders for regular updates. New data shows that fire-risk fiats can sell for as little as a third of their purchase prices.

    The safety scandal exposed by the Grenfell fire in 2017 has left up to 1.3 million flats unmortgageable and affects thousands of recently built houses. As many as three million people face a wait of up to a decade to sell or get a new mortgage because they cannot prove their homes are safe.

    The Sunday Times is campaigning to help owners, who face repair bills of up to £75,000 for flaws such as flammable cladding and missing fire breaks.
    Initial PRA analysis concluded that banks could absorb a fall in values. But a new study by the Leasehold Knowledge Partnership (LKP) charity has found that flats went to auction at 57 per cent of 110 developments with fire risks since December 2019. Almost two thirds were listed in the past six months.

    Four in five of the auctioned fire-risk flats failed to sell or were discounted by as much as two thirds in a random sample analysed by LKP. This includes flats that were unsold or withdrawn (23 per cent), sold for less than what owners had bought them for (27 per cent), or were marketed for less than that (29 per cent) where sales were too recent to show on the Land Registry.

    Last month a one-bedroom flat at Leftbank, Mancheste failed to sell despite being listed for half the £330,000 its owner had paid in 2017.

    The research comes as the Fire Safety Bill, against which 33 Tory backbenchers rebelled in an unsuccessful attempt to protect fiat· owners from fireproofing costs, is expected to pass in the Commons on Tuesday.

    Two thirds of Conservative MPs oppose a £5 billion government package for fire risk fiats that leaves most homeowners still picking up costs, according to a new YouGov survey for the National Housing Federation. Three quarters of MPs polled including 68 per cent of the Tories, said leaseholders should not pay any building safety costs.

    #2
    The stance taken today in Parliament is nothing short of a disgrace for all affected owners of suspect flats. Let your MP know of your feelings.

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      #3
      The property in Manchester you describe is similar to a property I sold in Manchester in 2006 for £425,000 where in 2015 after it had been re-possed it went to Auction and sold for £250.000. It had been re-possessed 3 years before and I believe the reason it took sol long to go to Auction was that the mortgage lender knew they were going to take a loss. Any re-possessed property which is on their books waiting to be sold stays at what they lent on it, until it is sold, the loss only becomes apparent when it is sold.

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        #4
        Perhaps when the Grenfell Enquiry is over and/if it is proven that the cladding was known to be a fire risk and should not have been supplied, and the suppliers will be sued for Billions in compensation, the government will have a better idea of how much they will have to give in compensation.

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          #5
          The high rise block of flats in East London which caught fire today is another major reason why the government needs to take remedial action to ensure that irrespective of where such properties are located, such properties need to be made safe where the wrong type of insulation was used and the developers held 100% accountable for the costs of works and NOT the leaseholders, in the meantime another nail in the coffin in getting approval for mortgages on affected properties.

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            #6
            https://www.standard.co.uk/news/uk/f...k-b933758.html

            The residents at the tower block are lucky to escape substantial damage to their building.

            LA is right the developers must be held accountable for replacing the wrong type of cladding .

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              #7
              Thanks Gordon999, your supportive comments are appreciated.
              I listened to a lady who in addition to living in one of the adjoining blocks is Head of the Residents Association, during the interview with Adrian Child’s on 5 Live, she disclosed that the leaseholders pay £46000 per month for the use of someone walking the corridors of all blocks to alert if there is an incidence of fire; unfortunately it seems that this was not fit for purpose as no alarm was given.
              How many other incidences occur before the Housing Minister takes a firm hand against the developers , if he doesn’t one has to ask why.

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                #8
                £46k a month just to walk around??! That works out to be £60 an hour. That is more than 6 times the minimum wage. Unless the block was big enough for there to need more than 4-5 people at a time, I find it ridiculous with all these crazy costs leaseholders have to bear.

                I only own one leasehold property (with share of freehold) and luckily the building is well managed and costs kept to a minimum. I will never buy another leasehold property again in my life, just not worth the uncontrollable nature of costs.

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                  #9
                  It's a bloody disgrace and sums up this government, sleazy, unaccountable liars.

                  I'm not sure what that makes the people who continue to vote for them . . .

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                    #10
                    Please read the news article which explains that the complex itself has more than one building. I agree that these costs certainly appear excessive and in this serious instance failed to raise the necessary alarm. Had it not been for this lady to go throughout her own building heaven know what might have happened.

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                      #11
                      Originally posted by loanarranger View Post
                      Thanks Gordon999, your supportive comments are appreciated.
                      I listened to a lady who in addition to living in one of the adjoining blocks is Head of the Residents Association, during the interview with Adrian Child’s on 5 Live, she disclosed that the leaseholders pay £46000 per month for the use of someone walking the corridors of all blocks to alert if there is an incidence of fire; unfortunately it seems that this was not fit for purpose as no alarm was given.
                      How many other incidences occur before the Housing Minister takes a firm hand against the developers , if he doesn’t one has to ask why.
                      I think we all know the answer to that..

                      BTW many residents/leaseholders have witnessed waking "watches" fast asleep on the job.

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                        #12
                        Why does that not surprise me, I surmise that these persons are paid the legal minimum wage but expected to work very long unsocial hours resulting in disengagement with the real reasons for being there.

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                          #13
                          The waking watchers seem a waste of money to me, it would be far better spent rectifying the problem. Obviously needed in the short term but the work should be carried out at the earliest opportunity.

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                            #14
                            I doubt whether anyone would disagree with you.

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