Two days before contracts were due to be exchanged, Sophie Elwright got word that her mortgage was gone.
Elwright, 29, and her husband Jordan, also 29, had rented a two-bedroom, top-floor flat in Derbyshire for £571 a month for four years before deciding to buy. In 2024 their landlord said he wanted to sell, but the couple thought he was asking too much. Then they found an identical flat in the building next door and agreed to buy it for £119,000. The offer was accepted in February 2024, and a mortgage offer followed in March.
In May the lender withdrew it. The completion date was just over a week away.
The lender’s objection
The problem was the flat’s running costs. At the time of purchase the service charge was £1,770.12 a year and the ground rent £200. “Even though all the accurate figures had been provided from the outset in our application, the mortgage offer was withdrawn months later in May,” said Elwright, an IT helpdesk analyst.
She said the lender raised the figures with the couple’s solicitor and judged them “too onerous” because they came to more than 1 per cent of the property’s value. “The lender said the property could not be considered acceptable or suitable to provide a mortgage for.”
Elwright described feeling “devastated, shocked, confused and completely powerless.” In her words: “The bottom had fallen out of our world and we genuinely believed we could have ended up homeless through no fault of our own.”
Nine days to a new deal
Their mortgage broker “sprung into action,” Elwright said. She sent fresh applications to lenders she thought more likely to say yes, and told the couple the original lender was unlikely to change its mind.
“At this point we were under enormous pressure and worried about how we were going to keep the purchase on track, but we had hope,” Elwright said. “It wasn’t until rejections started coming through citing the same service charge and ground rent problem that we began to panic.”
Their landlord gave them another extension on the rental lease. Nine days after the first offer was pulled, the couple secured a mortgage from a different provider. The purchase was delayed.
They now live in the flat. The service charge rose to £1,889.10 a year in 2025 and was cut to £1,834.19 this year. Elwright said it is not extreme compared with others. “If this experience can happen to us then there must be many others at risk too,” she said, adding that lenders need to be flexible “before service charges are brought under control and legislated” so leasehold flats do not become unmortgageable. She also worries about selling one day, since the couple want a house eventually.
What brokers say lenders look for
Ranald Mitchell, a director at Charwin Mortgages, said a high service charge has a real effect on borrowing because lenders do not look at the mortgage payment in isolation. “A service charge is a fixed monthly housing cost, just like council tax or ground rent, and it feeds directly into affordability,” he said. A common red flag is an annual charge around 1 per cent or more of the property’s value, or one that looks unusually high for the type, size or location of the home.
Nicholas Mendes, mortgage technical manager at John Charcol, said ground rent tends to be governed by hard limits, while service charges are judged more loosely. A charge that is high or climbing fast, he said, can signal an expensive building, major works ahead or a freeholder a lender would rather avoid. “A borrower can be turned down on this alone, even when the mortgage looks comfortably affordable.” Lenders also worry about resale, because a high charge shrinks the pool of buyers.
Mendes said that for a £360,000 flat with a £4,000 annual charge he would want to see three years of service charge accounts, the reserve fund position and anything on major planned works or section 20 notices.
Hamptons data showed the average service charge in England and Wales reached £2,405 a year in 2025, up 4.6 per cent on the year. It has risen 32.6 per cent over five years and 55.6 per cent over ten.
Buyers who hit this wall have a few routes: a bigger deposit, a different lender found through a broker (which costs money), or a longer mortgage term. The longer term lowers the monthly payment but costs more in interest over time.
