Secured Loan on a Listed Building

Grade I, Grade II* and Grade II: What the Difference Means for Lending

Listed buildings in England are classified into three grades. Grade II is the most common, covering around 91% of all listed buildings. These are considered nationally important and of special interest, warranting every effort to preserve them. Grade II* (pronounced Grade Two Star) covers approximately 6% of listings and represents particularly important buildings. Grade I covers the remaining 3% — these are of exceptional interest and are the most strictly protected.

For lending purposes, the grade of listing matters significantly. Grade II properties are the most widely accepted by lenders, as they are relatively common and the restrictions, while meaningful, are manageable for owners who understand them. Grade II* and Grade I properties are accepted by a much smaller number of lenders due to the greater complexity of their protection status, the specialist insurance required and the difficulty of carrying out repairs in the event of damage.

Conservation area designation is a separate but related consideration. A building does not need to be individually listed to be in a conservation area, and conservation area restrictions on alterations can affect lender appetite even for unlisted properties within those boundaries. Article 4 Directions can remove permitted development rights in conservation areas, which lenders also take into account when assessing the scope for future alterations.

Listed Building Consent and Alteration Restrictions

Any alteration to a listed building that affects its character as a building of special architectural or historic interest requires Listed Building Consent from the local planning authority. This applies to both external and internal changes, including alterations to features such as original fireplaces, windows, staircases, panelling and structural elements. Undertaking unauthorised works to a listed building is a criminal offence under the Planning (Listed Buildings and Conservation Areas) Act 1990 and can attract unlimited fines in the Crown Court.

Lenders are alert to the risk that previous owners may have carried out unauthorised alterations, which can create liability for the current owner and make the property difficult to sell or insure. When assessing an application, lenders will instruct a valuer to check for any obvious signs of unauthorised works, and where concerns are identified, they may require retrospective consent or indemnity insurance as a condition of lending. Retrospective Listed Building Consent is discretionary and not guaranteed.

The ongoing cost of maintaining a listed building to the standard required by Historic England — using approved materials and methods — is also higher than for standard properties. Lenders factor this into their assessment of affordability and residual property risk, often including an increased maintenance allowance in the expenditure assessment.

Specialist Insurance Requirements

Standard home insurance policies are generally not appropriate for listed buildings. Specialist listed building insurance covers the full cost of reinstatement using traditional materials and skilled craftspeople, which can be significantly more expensive than rebuilding a standard property of similar size. Lenders will want to see evidence of appropriate buildings insurance before proceeding.

Insurers who specialise in listed buildings include Hiscox, Ecclesiastical, NFU Mutual, Heritage (part of Coversure) and a number of Lloyd’s of London syndicates. Premiums for listed building insurance are typically 20-50 per cent higher than standard policies, and some insurers impose conditions on policies for Grade I properties that can be difficult to meet (such as chimney inspection clauses or thermal imaging requirements). Demonstrating that you have appropriate cover in place will be a condition of any secured loan offer.

Where a listed building has experienced flood damage, subsidence or fire, the complexity of reinstatement can be much greater than for a standard property, and some insurers will not cover properties with a history of these issues. This in turn can make securing finance more difficult and may mean a specialist high-net-worth broker approach is needed.

Which Lenders Will Consider a Listed Building?

The number of secured loan lenders willing to accept listed buildings is smaller than for standard properties, but meaningful options do exist. Together Money is one of the most well-known lenders in this space and will consider both Grade I and Grade II listed buildings as security, subject to valuation and insurance requirements. Shawbrook Bank, Pepper Money and United Trust Bank also accept listed buildings and have experience underwriting more complex property types.

High-street banks and building societies that offer secured loans typically restrict themselves to Grade II properties and may require additional conditions such as specialist valuation reports or evidence of Historic England approval for any recent works. Applications involving Grade I or Grade II* properties almost always need to go to specialist lenders.

Working with a whole-of-market broker who has experience with heritage properties is strongly recommended. They will know which lenders are actively lending on listed buildings, understand the documentation requirements and be able to present your application in the most favourable light. Attempting to apply directly without broker guidance risks wasting time with lenders who will decline based on policy alone. Rates for listed building secured loans may carry a small premium of 0.25 to 1.5 per cent over standard property loans, but this varies by lender and by the specific characteristics of the property.

Indicative Lender Appetite by Grade

The table below shows how specialist lenders typically approach listed property applications. Individual criteria change, so confirm the current position with your broker.

Lender	Grade II	Grade II*	Grade I	Typical Max CLTV
Together Money	Accepted	Case by case	Case by case	70-75%
Shawbrook Bank	Accepted	Accepted	Case by case	70-75%
Pepper Money	Accepted	Case by case	Declined	75%
United Trust Bank	Accepted	Accepted	Case by case	70%
Norton Home Loans	Accepted	Declined	Declined	70%

In all cases, evidence of Listed Building Consent for any recent material works, a specialist listed building insurance policy with an appropriately high reinstatement sum and a detailed valuation report from a surveyor familiar with heritage properties are likely to be required. Expect legal fees to be higher than for a standard second charge (typically £500 to £1,500 above standard) because of the additional title and consent checks.

Worked Example: Grade II Cottage in the Cotswolds

Consider a borrower who owns a Grade II listed stone cottage in the Cotswolds valued at £585,000. She has a first-charge mortgage of £340,000 at 4.49% fixed for four more years and specialist listed building insurance from Ecclesiastical with a £750,000 reinstatement sum. She wants to raise £45,000 to fund the restoration of original Cotswold stone mullioned windows and a lime-plastered internal wall, for which she has obtained Listed Building Consent.

Her combined LTV on completion would be approximately 65.8%, comfortably within specialist lender thresholds. Her broker obtains quotes from Shawbrook Bank and Together Money. Shawbrook offers a 12-year term at an APRC of 8.9%, monthly payment of £521, and total amount payable of approximately £75,020 including fees. The lender’s valuer confirms that the proposed works will be sympathetic and likely enhance rather than diminish the property’s value.

The ESIS sets out the APRC, monthly payment, total amount payable, any ERC during the five-year incentive period and the seven-day reflection period. After reflection, the borrower proceeds. Completion takes 42 working days due to the additional surveyor and solicitor checks required for the listed building, but the funds are released in a single tranche to her conservation-accredited contractor.

Consumer Protections and the Regulatory Framework

A regulated second charge mortgage on a listed building must meet the same FCA MCOB standards as any other regulated second charge: full affordability assessment, provision of an ESIS before commitment, and the statutory seven-day reflection period. The FCA Consumer Duty (effective from 31 July 2023) requires firms to deliver good outcomes, fair value and clear communications throughout the loan life cycle.

If a dispute arises — for example, over valuation, arrears handling or mis-sale — you can complain to the lender first and escalate to the Financial Ombudsman Service (FOS) if the response is unsatisfactory or absent after eight weeks. The FOS can award up to £430,000 for acts or omissions occurring from 1 April 2025 onwards. The service is free to complainants.

For listed buildings specifically, if a lender fails to deal appropriately with heritage-related issues (such as accepting a property without proper Listed Building Consent and then pursuing remediation costs), this could form the basis of an FOS complaint. The FCA Register should be used to verify both broker and lender authorisation before you sign any documents.