Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what estimate she has made of the number of leasehold flats containing combustible material with higher insurance costs that will be classified as permanently impaired under the Basel 3.1 requirements; and if she will make a statement.

We understand the question relates to regulatory requirements for property valuations under Basel 3.1.

There are several changes in the Prudential Regulation Authority’s (PRA) implementation of the Basel 3.1 standards that are relevant to mortgage valuation. Banks using the standardised approach to credit risk will have to update the valuation of mortgaged properties under specific circumstances such as if five years have passed since the valuation was last updated, when a borrower refinances their mortgage at the end of a fixed period, if modifications have been made to the property that unequivocally increase its value, or an event occurs that results in a likely permanent reduction in the property’s value (‘permanent impairment’).

The PRA does not expect the changes to have a material impact on current industry practice for determining property valuations, including for properties with cladding, as the changes primarily relate to when a valuation for a given property is updated as opposed to how the valuation itself is determined.

The government does not hold data on the number of properties, including for properties with cladding, that will be required to be re-valued under the different circumstances listed above