Lenders who won't go high enough

Anyone who wants to buy a flat in a local authority block is likely to encounter difficulties obtaining a mortgage or finding a decent interest rate for their loan.

Lenders frequently reject high-rise flats out of hand and will want to negotiate over other aspects of the property deal. Once you find a company prepared to provide a loan on a former local authority home there could still be problems ahead.

In the past, it has been common among lenders to reject anything on or above the seventh floor of any block. Ray Boulger, at mortgage broker Charcol, says there are many hurdles to overcome.

"The majority of lenders have a cut-off point somewhere between the fourth and sixth floors. Some will not consider homes in council blocks and if they do, they won't like it unless at least half are owner occupied," he says.

"If the flat is one of many private homes in the block and the lender is happy with that, it will still want to know that the flat isn't in a grotty block or in a grotty area, because they will want to feel secure it is fairly presentable and sellable should the worst happen and they need to repossess and sell it on.

"Lenders tend not to take such a benign view because these are the properties, along with flats above shops and in lofts, that fall the most in any property slowdown."

All these hurdles can be overcome, he says, but he recommends the use of a broker who will know who to approach in lending departments. Most of the lenders willing to go off the beaten track and stretch their basic criteria to include former local authority homes, are on the high street.

Mr Boulger says Royal Bank of Scotland, NatWest, HSBC, Abbey and Halifax will consider proposals. Building societies the Derbyshire and Skipton, Lloyds Bank subsidiary Scottish Widows Bank and the Mortgage Works will also look at former council property. "But if you walk into a branch and talk to one of its advisers, it could cause you problems. It might be OK, but you're taking pot luck.

"They might go along with the whole plan, giving it the go-ahead, only to find they haven't mentioned crucial issues like how many floors up the flat is, and how many other homes in the block are private. Then someone kills the deal at a higher level.

"In this situation you should be able to get any fees and costs back, but the buyer will have wasted lots of time and maybe missed out on their bargain."

Mr Boulger says a limited list of lenders also means buyers are less likely to get the best deal that week.

"Lenders won't penalise buyers in these situations. They will give them the best possible interest rate if they give it the go-ahead.

"But the fact that you are choosing from a more limited list will almost certainly mean some of the best buys are beyond reach."