The Hidden Cost of Luxury

In Prime Central London, prestige doesn’t stop at square footage. Increasingly, luxury is defined by the services and amenities that come with a property: 24-hour concierge teams, private gyms and pools, valet parking, wine cellars, and even in-house wellness spas. For buyers, these extras enhance lifestyle and status. For lenders, however, they introduce a unique challenge—service charges.

In buildings across Mayfair, Belgravia, and Knightsbridge, annual service charges can exceed £20,000, and in some cases reach £50,000 or more. While these costs reflect the quality of services provided, they also impact affordability, valuations, and lender appetite. For wealthy buyers, the sums may feel negligible, but lenders are required to assess them rigorously.

Why Service Charges Matter to Lenders

Mortgage providers focus on the borrower’s ability to sustain costs over time. Even for high-net-worth clients, lenders want assurance that ongoing obligations do not compromise long-term repayment capacity.

Service charges are treated much like debt commitments: they reduce disposable income, which affects affordability models. In a market where interest rates have fluctuated (as we covered in our Bank of England rate cut update), lenders are even more sensitive to cumulative costs.

Surveyors also play a role. When valuing a luxury apartment, they consider whether high service charges will deter future buyers. If resale demand is likely to be limited by running costs, lenders may apply down-valuations, which reduce loan-to-value ratios and complicate approvals.

The Fine Line Between Acceptable and Excessive

Not all high service charges are viewed equally. Lenders distinguish between charges that reflect genuine, value-adding amenities and those that appear inflated. For example:

• Acceptable: A Knightsbridge development with a pool, spa, concierge, and underground parking charging £25,000 annually.

• Concerning: A smaller Belgravia block with modest amenities charging £18,000 annually due to inefficiencies or poor management.

Ultimately, lenders look for proportionality. If the amenities justify the costs and the building commands strong demand, high charges may be tolerated. But if charges seem disconnected from value, lenders will often reduce exposure or decline the case outright.

Service Charges and International Buyers

International buyers often encounter friction here. Many arrive expecting that lenders will overlook running costs when the borrower’s global wealth is substantial. Yet UK lenders are bound by regulatory frameworks requiring them to account for affordability.

This disconnect can frustrate buyers who are used to private banking relationships abroad, where liquidity and assets matter more than income. It is the same challenge we explored in our blog on international buyer finance.

The solution lies in structuring the case for the right lender—often a private bank or specialist funder who understands that HNW clients should be assessed differently.

The Role of Reserve Funds and Section 20 Works

Another element of service charges that worries lenders is the potential for sudden spikes. Many luxury buildings require cyclical maintenance—façade cleaning, lift replacements, or roof repairs. If reserve funds are inadequate, residents may face large one-off bills under Section 20 notices.

As we highlighted in our mansion block mortgage guide, these costs can easily run into six figures per flat. Lenders want assurance that reserve funds are properly managed, accounts are transparent, and no major liabilities are looming. Without this, they may apply conditions, reduce LTVs, or withdraw altogether.

Scenario: The Amenities Arms Race

One striking example is a Mayfair development completed in 2023, where apartments sold for £15 million but annual service charges topped £50,000. Buyers were paying for a spa, cinema room, 24-hour valet, and private dining services. While the amenities added prestige, lenders questioned whether resale demand would remain strong enough to justify the costs.

In the end, finance was secured through a private bank that assessed the borrower’s global wealth profile rather than income affordability alone. The case demonstrates a broader trend: while mainstream lenders may balk, private banks are often willing to back properties where prestige outweighs conventional affordability models.

Exit Strategy Considerations

High service charges also raise questions about exit strategy. If a buyer uses bridging finance to secure a property quickly, they must demonstrate that long-term refinancing is viable. Lenders want reassurance that the property’s value will hold, even with running costs factored in.

We explored this risk in our blog on bridging loan exits. For high-service-charge properties, the principle applies even more strongly: without a credible exit, borrowers risk being trapped in costly short-term debt.

The 2025 Market Context

As of late 2025, service charge scrutiny is intensifying. With inflation affecting labour and materials, many London developments have raised charges to maintain quality standards. Buyers should expect lenders to probe harder into accounts and management structures.

At the same time, Prime Central London continues to attract international wealth. As we noted in our PCL market update, demand for best-in-class properties remains resilient, meaning lenders are unlikely to withdraw completely. Instead, they will differentiate more carefully between well-managed luxury schemes and poorly run buildings with inflated charges.

How Willow Can Help

At Willow Private Finance, we regularly work with clients purchasing or refinancing properties in high-service-charge developments. Our role is to:

• Present cases to lenders who understand HNW affordability and are comfortable with higher running costs.

• Analyse service charge accounts and anticipate lender concerns before they arise.

• Identify private banks willing to look beyond income models when the client’s wealth profile is strong.



• Structure bridge-to-term strategies where quick completion is required, with clear exits into long-term debt.

• Coordinate with valuers and solicitors to ensure major works and Section 20 risks are factored into finance terms.

Our goal is not only to arrange finance but to position clients as credible, prepared borrowers—even when properties come with unusual obligations.

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