Almost six months on, is the picture any clearer for our new build purchasers?
Almost six months on, is the picture any clearer for our new build purchasers? It’s fair to say that we have all been surprised with the continued unprecedented demand seen so far this year, and with housebuilders working hard to make up for lost production in 2020 and shortages of available stock in both new build and second-hand, we could be in for a very busy 2021.
We entered 2021 knowing it would be a year of change, but almost halfway through the year, there still remains a gap in the mortgage market for those new build purchasers who have a small deposit but do not fit the new Help to Buy (HTB) Shared Equity Scheme (for more information on the new HTB scheme see the HBF’s Stewart Baseley’s Wise Owl article from January). Whilst the new government backed mortgage guarantee scheme has helped kick-start the 95% LTV market for second-hand properties, none of those lenders have chosen to extend the scheme onto new build homes. Currently all but one of the high street lenders remain at 85% LTV for new build properties with the exception being at 90%.
Whilst we are thankful for the handful of mainly regional Building Societies who are offering 95% new build incentives, we need a robust medium to long term solution, especially with the current HTB scheme end date of March 2023 looming.
There are a number of excellent solutions on the horizon with lenders looking at innovative ways of providing high LTV new build mortgages. One of those is ‘Deposit Unlock’. The Home Builders Federation and its members have teamed up with insurance broker Gallagher Re to develop an innovative new mortgage indemnity scheme. The scheme seeks to ensure competitively-priced high LTV mortgages are available in the market, and it is hoped the initial pilot will go live within weeks whilst discussions are ongoing with a range of lenders.
Let’s not forget the government’s commitment to the First Homes scheme, which following the initial phase one pilot, should start marketing properties and taking applications in the autumn. The scheme aims to make more new homes available at a discount to local people who would otherwise struggle to buy. A First Home will be sold at 30% below market price in perpetuity, although local authorities can choose to set the discount at 40% or 50%. The value of homes after the discount has been applied is capped to £250,000, or £420,000 inside London.
I am confident that by summer a number of these initiatives will come to fruition, and a healthy and competitive market place for all our purchasers with small deposits will start to emerge. With extra underwriting and the added complications of things like furlough income, the role of the mortgage broker is so important, and with an ever increasing number of niche new build schemes the specialist new build broker will be key to their success.