Millions of UK flat owners could soon discover their properties are effectively unmortgageable, or at least far harder and more expensive to finance, thanks to spiralling service charges that are quietly eroding affordability and saleability.
New analysis from estate agency Hamptons shows the average annual service charge for leasehold flats in England and Wales hit £2,405 (£200.42 per month) last year, the first time it has exceeded £200 monthly.
That’s a 4.6% jump from 2024, outpacing inflation (which rose 3.4% over the same period) by 1.2 percentage points. Over five years, charges have climbed 32.6% from £1,814 in 2020, and over a decade they’ve surged 55.6%.
In London, the pain is even sharper. Average charges reached £2,801 (£233.45 per month), up 6.4% year-on-year, 41.2% over five years, and 64.5% over the last decade.
Taller buildings with more amenities, ageing infrastructure,, and rising costs for lifts, roofs, windows, and compliance are key drivers. Insufficient sinking funds often lead to large, unplanned bills passed directly to leaseholders.
An alarm bell
Hamptons has raised alarms over the fact that service charges are seen as a proportion of property value.
The group found that 37% of flats now have charges exceeding 1% of their value, up from 29% five years ago. Another 14% exceed 2%, and 6% top 3%, with city-centre properties disproportionately hit.
Many mortgage lenders have tightened criteria, refusing or restricting loans on flats where service charges routinely surpass this 1% threshold.
For example, a £4,000 annual charge on a £300,000 flat would often fall foul of lender rules. With fewer willing lenders, buyers face limited options, higher borrowing costs, or outright rejection.#
This has had knock-on effects. Flats with charges at or below 1% of value were 50% more likely to sell than those at 2% or higher. Combined with flat prices in many areas still below pre-pandemic 2019 levels, rising charges are squeezing equity, affordability, and marketability.
“Many leaseholders have seen the economic efficiencies of sharing a single roof with their neighbours steadily eroded by rising running costs,” the Hamptons report notes.
Low-charge flats are vanishing. Only 14% now cost under £100 per month, mostly in low-rise 1970s/80s blocks in regions like the North East, East Midlands, and South West.
Charges also vary by flat size: one-beds averaged £2,074 (£172.81 monthly, up 3.3%), two-beds £2,463 (£205.28, up 4.8%), and three-beds £3,146 (£262.16, up 5.7% and crossing £3,000 for the first time).
The government has taken steps on related issues, capping ground rents and moving toward banning new leasehold flats, but service charges remain a major pain point for existing owners.
With management and compliance costs continuing to rise, experts warn that more leaseholders could wake up to diminished property values and financing headaches without warning.
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