Leasehold costs creating ‘second mortgage’ for millions
An estimated five million leaseholders in England and Wales are facing what campaigners describe as a ‘second mortgage’ due to escalating service charges, insurance premiums and ground rents on their properties.
Katie Kendrick OBE, founder of the National Leasehold Campaign, has warned that leaseholders are experiencing a financial crisis as costs continue to rise whilst key provisions of the Leasehold and Reform Act 2024 remain unimplemented.
“Leaseholders cannot wait any longer. They are living through a cost of living crisis within a cost of living crisis,” Kendrick told The Negotiator. “Millions are being hammered by spiralling service charges, soaring insurance premiums and money-for-nothing ground rents that amount to a second mortgage.”
Market impact
The escalating costs are affecting property liquidity, with some leaseholders unable to sell or remortgage their homes. This situation mirrors broader challenges in the housing market, where financing options continue to evolve for different property sectors.
Kendrick stated that leaseholders are “trapped in homes they cannot sell, cannot remortgage and are struggling to keep up. For some, the threat of losing their home is no longer a fear, it is a reality.”
The campaign highlights that leaseholders pay all costs and carry all risks of homeownership without owning the freehold. After completing mortgage payments and covering ongoing charges, leaseholders own only a lease rather than the property itself.
Reform timeline
Labour pledged in its manifesto to “bring the feudal leasehold system to an end” and has stated that leasehold will no longer exist by the end of the current Parliament. However, the timeline for implementation of existing legislation remains unclear.
The Leasehold and Reform Act 2024 was designed to address some of these issues, but Kendrick argues that delays in bringing provisions into force are leaving leaseholders in financial distress. The campaigner describes the current system as “a blank cheque, impossible to budget for and designed to keep extracting more money year after year.”
The National Leasehold Campaign has called for immediate action to implement reforms, stating that leaseholders have spent a decade warning successive governments about the current situation. The organisation argues that the leasehold system is “exploiting leaseholders, draining household finances and damaging the wider housing market.”
Investment implications
The ongoing leasehold debate has implications for property investors and buyers considering leasehold properties. The uncertainty around future reforms and the financial burden of leasehold ownership may affect property values and marketability, particularly in the flat market where leasehold arrangements are most common.
Industry professionals note that the situation could influence buyer preferences and lending decisions as the market adjusts to potential legislative changes.
