Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.

Over 1.5 Million UK Homes Deemed Unmortgageable by Mainstream Lenders

More than 1.5 million homes across the UK could be declined for a standard mortgage by high street lenders, according to research from Together. The study estimates that around 6% of the UK’s 28 million residential properties would struggle to secure mainstream mortgage finance due to factors such as construction type, lease length, or condition.

Properties that may be classified as “unmortgageable” by lenders include thatched cottages, high-rise flats, homes located close to commercial premises, or those lacking functioning kitchens or bathrooms. For prospective buyers, this can result in having an offer accepted only for a mortgage application to be rejected because of the property’s characteristics, rather than the buyer’s financial circumstances.

Despite these challenges, Together’s research indicates there is strong demand for such properties, particularly among buyers seeking lower purchase prices or renovation opportunities. Among respondents who had purchased or seriously considered buying an unmortgageable property, 44% believed the home offered better value for money than a more traditional property. Nearly a third (31%) were motivated by the opportunity to renovate or restore a property, while 28% hoped to add value before selling it for a profit.

The research also found that 31% of buyers were attracted by what they viewed as a worthwhile risk-to-reward ratio, despite expecting the process to be challenging. A further 21% believed the potential rewards outweighed the risks, while 19% said they were willing to take on a property that others might avoid. Just 12% admitted they had underestimated the challenges or were unaware of the risks involved.

Investment potential was another significant factor. More than a quarter (28%) cited the lower purchase price as the main attraction, rising to 32% among those buying a property as their primary residence. For buy-to-let investors, 35% said the prospect of rental income was the biggest incentive.

However, securing finance remains a major obstacle. More than one in five respondents (21%) said they had already experienced a mortgage application being rejected, while almost a third (32%) reported having access to a much smaller pool of lenders willing to consider their application.

According to Together, many properties which are otherwise habitable and located in desirable areas remain difficult to buy because they do not meet the lending criteria used by many mainstream banks. The findings come as policymakers continue to debate how to address the UK’s housing shortage. Together argues that alongside building new homes, bringing existing properties back into use could help increase housing supply, provided buyers have access to more flexible finance.