Virgin Money has announced it is withdrawing from self-build lending.
Jon Hall, CEO of Saffron Building Society, said: “It’s a shame that Virgin Money has decided to turn its back on the UK’s self-builders. There are approximately 11,000 new homes self-built each year, which accounts for 7% of new housing stock and 26% of all new detached homes. The value of self-build to the construction market is £2.3bn meaning that it makes an important contribution to economic recovery, which is why the government is keen to support self-builders by giving them exemption from the new Community Infrastructure Levy.
“Virgin has presumably decided to abandon self-build because it is not a mass-market, but it is nonetheless an important sector which is why Saffron Building Society is continuing to support it. There is a real danger that large lenders simply target mass mortgage markets and, in so doing, create real problems for borrowers facing special situations. I believe it’s important that lenders continue to support valid markets such as self-build.”
Raymond Connor, chief executive of BuildStore Financial Services, added: “We are disappointed with Virgin Money’s decision to withdraw from self build lending, but given the limited nature of its product – only lending and releasing funds once the property is wind and watertight, which is a relatively late stage of the build – it is not surprising that they have seen very little demand from self builders.
“It’s especially disappointing, as BuildStore had approached Virgin Money to discuss how they could better meet the financial needs of self builders, and if approached in a more constructive way, it could easily have been doing £100m in self build lending every year, funding hundreds of new homes.
“In our experience, self build customers require funding form day one, and a positive flow of cash to help them purchase their plot, and commence construction. We continue to work with lenders who understand this cash-flow need, and can provide that type of funding. Our products offer lending at an early stage, and funds can also be released in advance of when they are needed, to help keep the project running.”
Nigel Payne, associate director of BuildLoan, BuildStore’s intermediary division, said: “With the right product, Virgin Money could have been a perfect brand for the intermediary self build lending market, and with our broker enquiries and mortgage approvals increasing every month, it has missed out on a vital opportunity to help support a growing market.”