THE PROPERTY FILTER TAKE
Some lenders have cut their service charge threshold from 2% to 1% of property value, placing 37% of UK flats in restricted mortgage territory - up from 29% in 2020.
A flat above that 1% line faces a narrower buyer pool. Hamptons found that flats at or below 1% of value are 50% more likely to secure a buyer than those at 2%+.
Before committing to any flat purchase, you may wish to calculate the service charge as a percentage of asking price and verify the specific criteria of your intended lender.
Service charges - the annual maintenance fee flat owners pay towards shared building upkeep - have been rising for years. Most buyers noted the cost and moved on. Now lenders are making that harder to do.
Some lenders have shifted their threshold. Where they previously declined mortgages on flats where the service charge exceeded 2% of the property's value, some have moved that line to 1%. According to Hamptons analysis published in Mortgage Solutions (March 2026), 37% of flats in England and Wales now have service charges above that 1% mark. In 2020 it was 29%. More than one in three UK flats now sits in territory where a mortgage may simply not be available.
What Has Changed With Lender Criteria?
The mortgage market works on hard stops. Lenders set firm thresholds - not rough guidelines. When some moved from 2% to 1%, they doubled the number of flats caught by the rule.
The result shows up at the point of sale. Hamptons found that flats with service charges at or below 1% of value were 50% more likely to secure a buyer than those at 2% or above. That gap is not abstract. It determines how liquid your investment actually is when you want to exit. Before committing to a flat purchase, it is worth running the numbers through a mortgage stress-test calculator to understand how lender criteria interact with the full cost picture.
What Do the Service Charge Numbers Actually Look Like?
The average service charge in England and Wales has hit £2,405 per year - £200.42 per month - according to Hamptons. That is the first time the monthly figure has crossed £200. Over the past year charges rose 4.6%, and over five years they are up 32.6% from £1,814 per year in 2020, outpacing CPI inflation of 30.9% over the same period.
London runs higher: £2,801 per year (£233.45 per month), up 6.4% year on year and 64.5% over ten years, per Hamptons. Breaking down by flat size, 1-bed flats averaged £2,074 per year (£172.81 per month, up 3.3%) and 2-beds averaged £2,463 per year (£205.28 per month, up 4.8%). Three-bed flats crossed £3,000 annually for the first time, at £3,146 per year (£262.12 per month, up 5.7%), per Hamptons.
Only 14% of flats now carry charges below £100 per month, down from 34% in 2020 (Hamptons). The cheapest areas remain the North East - 30% of flats below £100 per month - and the East Midlands and South West at 28% each. David Fell, lead analyst at Hamptons: "Many leaseholders have seen the economic efficiencies of sharing a single roof with their neighbours steadily eroded by rising running costs." He pointed to 30-year-old city centre blocks facing big-ticket maintenance - roofs, lifts, windows - without sinking funds (a reserve pot set aside for future major repairs) in place.
What Does This Mean If You Own or Are Buying a Flat?
The lending restriction feeds directly into sale prices. Hamptons data shows 19.9% of flat sellers in England and Wales sold below their purchase price. High service charges narrow the buyer pool, which puts downward pressure on what you can actually achieve at sale.
The key number is simple: divide the annual service charge by the property value. If it lands above 1%, you may face fewer lenders and a thinner buyer market. At 14% of flats already exceeding 2% of value and 6% exceeding 3% (Hamptons), a large portion of the market sits in restricted territory. The negotiation and finance hub covers how running costs factor into offer strategy and due diligence.
If you are assessing flats for purchase, you may wish to check the service charge level early and ask whether a sinking fund exists for the block. The property investment strategies hub covers how to factor running costs into total return - worth the time when service charges are rising at 4.6% a year. You can also access free resources and checklists to support your flat due diligence process.
Key takeaways
37% of flats in England and Wales have service charges above 1% of property value, up from 29% in 2020 (Hamptons).
Some lenders have tightened their threshold from 2% to 1%, narrowing the pool of available mortgages for a significant share of the flat market.
The average service charge has reached £2,405 per year (£200.42 per month) - the first time the monthly average has exceeded £200.
Flats with service charges at or below 1% of value are 50% more likely to secure a buyer than those at 2%+ (Hamptons).
19.9% of flat sellers in England and Wales sold below their purchase price (Hamptons).
Service charges - the annual maintenance fee flat owners pay towards shared building upkeep - have been rising for years. Most buyers noted the cost and moved on. Now lenders are making that harder to do.
Some lenders have shifted their threshold. Where they previously declined mortgages on flats where the service charge exceeded 2% of the property's value, some have moved that line to 1%. According to Hamptons analysis published in Mortgage Solutions (March 2026), 37% of flats in England and Wales now have service charges above that 1% mark. In 2020 it was 29%. More than one in three UK flats now sits in territory where a mortgage may simply not be available.
What Has Changed With Lender Criteria?
The mortgage market works on hard stops. Lenders set firm thresholds - not rough guidelines. When some moved from 2% to 1%, they doubled the number of flats caught by the rule.
The result shows up at the point of sale. Hamptons found that flats with service charges at or below 1% of value were 50% more likely to secure a buyer than those at 2% or above. That gap is not abstract. It determines how liquid your investment actually is when you want to exit. Before committing to a flat purchase, it is worth running the numbers through a mortgage stress-test calculator to understand how lender criteria interact with the full cost picture.
What Do the Service Charge Numbers Actually Look Like?
The average service charge in England and Wales has hit £2,405 per year - £200.42 per month - according to Hamptons. That is the first time the monthly figure has crossed £200. Over the past year charges rose 4.6%, and over five years they are up 32.6% from £1,814 per year in 2020, outpacing CPI inflation of 30.9% over the same period.
London runs higher: £2,801 per year (£233.45 per month), up 6.4% year on year and 64.5% over ten years, per Hamptons. Breaking down by flat size, 1-bed flats averaged £2,074 per year (£172.81 per month, up 3.3%) and 2-beds averaged £2,463 per year (£205.28 per month, up 4.8%). Three-bed flats crossed £3,000 annually for the first time, at £3,146 per year (£262.12 per month, up 5.7%), per Hamptons.
Only 14% of flats now carry charges below £100 per month, down from 34% in 2020 (Hamptons). The cheapest areas remain the North East - 30% of flats below £100 per month - and the East Midlands and South West at 28% each. David Fell, lead analyst at Hamptons: "Many leaseholders have seen the economic efficiencies of sharing a single roof with their neighbours steadily eroded by rising running costs." He pointed to 30-year-old city centre blocks facing big-ticket maintenance - roofs, lifts, windows - without sinking funds (a reserve pot set aside for future major repairs) in place.
What Does This Mean If You Own or Are Buying a Flat?
The lending restriction feeds directly into sale prices. Hamptons data shows 19.9% of flat sellers in England and Wales sold below their purchase price. High service charges narrow the buyer pool, which puts downward pressure on what you can actually achieve at sale.
The key number is simple: divide the annual service charge by the property value. If it lands above 1%, you may face fewer lenders and a thinner buyer market. At 14% of flats already exceeding 2% of value and 6% exceeding 3% (Hamptons), a large portion of the market sits in restricted territory. The negotiation and finance hub covers how running costs factor into offer strategy and due diligence.
If you are assessing flats for purchase, you may wish to check the service charge level early and ask whether a sinking fund exists for the block. The property investment strategies hub covers how to factor running costs into total return - worth the time when service charges are rising at 4.6% a year. You can also access free resources and checklists to support your flat due diligence process.
Key takeaways
37% of flats in England and Wales have service charges above 1% of property value, up from 29% in 2020 (Hamptons).
Some lenders have tightened their threshold from 2% to 1%, narrowing the pool of available mortgages for a significant share of the flat market.
The average service charge has reached £2,405 per year (£200.42 per month) - the first time the monthly average has exceeded £200.
Flats with service charges at or below 1% of value are 50% more likely to secure a buyer than those at 2%+ (Hamptons).
19.9% of flat sellers in England and Wales sold below their purchase price (Hamptons).
Frequently asked questions
Frequently asked questions
What is a service charge and why does it affect my mortgage?
Which lenders have moved to the 1% threshold?
How do I calculate whether a flat is above the 1% threshold?
Does a high service charge always mean a declined mortgage?
