Sophie Elwright, 29, and her husband, Jordan, 29, rented a two-bedroom, top-floor flat in Derbyshire for £571 a month for four years before deciding they wanted to buy.
In 2024, the couple’s landlord said he wanted to sell the flat but, whilst interested, they felt he was asking too much.
Fortune struck and the couple managed to snap up an identical flat to buy in the building next door to theirs for £119,000. Their offer was accepted in February 2024 – but not everything went to plan.
The couple received a mortgage offer in March 2024, but in May it was withdrawn. The reason? The lender was concerned about the service charge and ground rent for the flat.
At the time of purchase, the service charge and ground rent for the flat was £1,770.12 and £200 a year, respectively.
Sophie, an IT helpdesk analyst, said: “Even though all the accurate figures had been provided from the outset in our application, the mortgage offer was withdrawn months later in May.
“The lender queried the service charge and ground rent figures with our solicitor and deemed them to be ‘too onerous’ as they amounted to more than 1 per cent of the value of the property. The lender said the property could not be considered acceptable or suitable to provide a mortgage for.”
Sophie said she felt “devastated, shocked, confused and completely powerless” after receiving the lender’s unwelcome news.
It came just two days before the date the parties involved had agreed to exchange contracts and just over a week away from the completion date.
Sophie said: “The bottom had fallen out of our world and we genuinely believed we could have ended up homeless through no fault of our own.”
The couple’s mortgage broker “sprung into action” to resolve the debacle. “She started firing off new mortgage applications to lenders she knew would be more likely to give us a mortgage and told us the existing lender would be unlikely to change their mind,” Stephanie said.
“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. It wasn’t until rejections started coming through citing the same service charge and ground rent problem that we began to panic.”
Over the coming days, the couple’s landlord provided them with another extension to their rental lease. Nine days after their initial mortgage offer was withdrawn the couple secured a new mortgage deal with a different provider, though their property purchase was delayed due to the original lender’s actions.
Sophie and Jordan are now happily living in the flat they purchased and their service charge increased to £1,889.10 a year in 2025 before being reduced to £1,834.19 this year.
“Before service charges are brought under control and legislated, lenders need to be flexible to prevent leasehold properties becoming unmortgageable. Our service charge is not extreme compared to others, so if this experience can happen to us then there must be many others at risk too.
“We do worry about selling the flat as this is not our forever home and we want a house at some point. Hopefully, any potential buyers won’t face the same obstacles we did.”
When buying a property, many purchases dwell on their deposit, the size of the mortgage they can get and what their monthly mortgage repayment would look like.
But if you are buying a property with a service charge, your prospective borrower will be looking carefully at the service charge and ground rent.
Ranald Mitchell, a director at Charwin Mortgages, said: “High service charges can have a very real impact on mortgage borrowing because lenders do not just 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.”
As a buyer, the higher the service charge on a property, the less disposable income you will have available to pay the mortgage.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “It is worth separating service charges from ground rent, because the two get muddled.
“Ground rent tends to be governed by hard limits, often a percentage of the value with caps on how it can rise. Service charges are judged more loosely, on affordability and on whether the number looks sensible to a future buyer.”
How much are average service charges?
In 2025, the average service charge on a property across England and Wales rose to £2,405 a year, up 4.6 per cent year on year, recent Hamptons data showed.
Outstripping inflation, the average service charge surged by 32.6 per cent in the past five years and 55.6 per cent over the last decade, Hamptons added.
When do lenders start worrying about service charges?
There is no single set figure mortgage lenders look at and deem too high when they scrutinise service charges on properties.
But a common “red flag” for lenders is when the annual property service charge is around one per cent or more of the property’s value, Mitchell said. In other cases, issues might surface if the service charge seems unusually high for the type, size or location of the property.
Lenders also want to know that they would be able to sell the property easily if they needed to recover their money. A high service charge shrinks the pool of potential available buyers.
Mendes said: “A service charge that is high or climbing fast tells a lender something: an expensive building, major works coming or a freeholder they would rather not touch. A borrower can be turned down on this alone, even when the mortgage looks comfortably affordable.”
Taking an example of a £360,000 flat with a £4,000 annual service charge, Mendes said: “I would not write it off, but I would not wave it through either.
“I’d need to see the last three years of service charge accounts, the reserve fund position and anything on major planned works or section 20 notices. A charge that is high but stable and properly explained is a very different animal to one creeping up year on year with no reason given.”
Options for buyers struggling with service charges
If you are a buyer and struggling to secure a mortgage due to a service charge issue, there are options if you want to pursue the purchase.
Stumping up a larger deposit is one option, though this will not be possible for every buyer.
Another option is finding a different lender. You could do this by appointing a mortgage broker to help you, though this comes at a cost. A mortgage broker should know which lenders are more relaxed about higher charges.
Finally, stretching the term of your mortgage could help in some cases as it will lower your monthly payment. This is not an option without drawbacks though. Over time, the interest rate payments on the mortgage will cost more than if you had a deal with a shorter term.
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