PMS Mortgage Club and Sesame Network want lenders to increase Loan to Values (LTVs) on new build mortgages in order to bridge the gap that could be left when the government’s Help to Buy scheme is withdrawn.
They are also calling for more lenders to embrace Modern Methods of Construction (MMC) in order to help the UK meet its ambitious house building target.
Stacey Wood, national new build relationship manager for Sesame and PMS, said: “Since the launch of Help to Buy in 2013, the 20% interest-free equity loan offered as part of the scheme has supported more than 210,000 property purchases – 81% of them to first time buyers.
“However, with Help to Buy scheduled to shift to first time buyers only in 2021, and then removed completely in 2023, we urgently need to look at ways for customers to still afford a new home. The average purchase price for a first time buyer using the Help to Buy scheme on a new build property in 2019 Q1 was £294,920.
“With only a small number of lenders operating above 85% LTV on new build, this could mean customers having the challenge of raising a deposit of over £44,000 post Help to Buy. The solution therefore has to be more lenders increasing their LTVs on new build properties, which the industry needs to start planning for sooner rather than later.”
Analysis of 100 lenders undertaken by PMS and Sesame has found that only 10 offer 95% LTV mortgages on new build houses, demonstrating the progress that still needs to be made.
Wood added: “We have recently seen some improvements from lenders on higher LTVs, which is a step in the right direction, but much of this has come from specialist lenders and small regional building societies, so there is much to be done in terms of mobilising the broader market into action on this important issue.”
Jane Benjamin, director of mortgages at Sesame and PMS, said: “We are in constant dialogue with lenders as they shape their future strategies and propositions for customers. New build is an important part of this agenda, particularly as 85% of this market is advised, and we are also in touch with government bodies and builders in the pursuit of long-term solutions that will enable the new build market to thrive.
“More lenders embracing MMC is another part of the long-term solution and it’s something else we are raising in our discussions. With the government continuing to fall short of its target of building 300,000 homes a year, MMC could enable new properties to be constructed quickly and efficiently.
“Progress is being made, with some lenders now considering MMC based on approved contractors, warranties and satisfactory valuations, but more innovation is needed if we are to meet the needs of future customers.”