Flat owners are facing a service charge tipping point that could render their homes unsellable and unmortgageable.In recent years, service charges have risen sharply while the price of flats has fallen. Now, mortgage brokers say they are seeing increasing numbers of people having their mortgage applications rejected due to this disconnect. Some banks have tightened their rules and now won't offer mortgages on flats where the annual service charge exceeds 1 per cent of the property's value. This is because a high service charge could have an impact on how easily a lender could sell the property were it to be repossessed. In 2025, some 37 per cent of flats had an annual service charge exceeding 1 per cent according to property firm Hamptons, up from 28 per cent a decade earlier. It means a mortgage application on a flat valued at £300,000 with an annual service charge of £4,000 could be refused by some lenders. Crunch point: Some lenders won't offer a mortgage if the service charge exceeds 1% of a home's value While some lenders may refuse the mortgage outright, many will make a call based on the opinion of their surveyor or valuer. William Coe of mortgage broker Cleerly says: 'We are seeing an increase in mortgage applications stalling or failing purely due to spiralling service charges.'When a flat's service charge approaches or hits that 1 per cent mark, many mainstream lenders will indeed defer to the surveyor. 'If the surveyor decides the fee is onerous or completely out of step with the local market, the property is flagged as unsuitable security, and the mortgage is declined flat out.'Rising service charges and falling flat pricesRising service charges combined with falling or flatlining values is a dangerous combination. Across England and Wales, flat values have risen 16 per cent on average over the last 10 years, according to Land Registry data. But in London, where flats make up more than half of the housing stock, the average price of a flat hasn't moved in the last decade. William Coe of mortgage broker CleerlyMeanwhile, the average service charge has risen 55.6 per cent over the last decade, according to Hamptons. This is Money readers have reported hikes of 50 per cent or more within the last five years alone.The average leaseholder's service charge bill now ranges from £1,525 a year for the cheapest 10 per cent of buildings to £8,680 for the top 10 per cent, according to the latest research by the Property Institute.Last year, the average flat had an annual service charge equal to 0.9 per cent of its value, according to Hamptons - perilously close to the 1 per cent that some lenders are using as their line in the sand. Mortgage broker Aaron Strutt of Trinity Financial says: 'If we have not already hit the tipping point then we are pretty close. 'People are worried about buying flats at the moment because of the fees and ongoing unknown costs.'Recent analysis for This is Money by analytics firm PropertyData found some areas where service charges are way out of kilter with flat prices.In the BD1 postcode in Bradford city centre, service charges averaged £2,023 while the average asking price for these properties was £68,050. It means the typical service charge equates to 3.13 per cent of the asking price.The same could be seen in L2, in Liverpool's city centre. Service charges there were £2,910 per year when the average asking price was £122,374. That means the service charge is 2.58 per cent of the asking price.