A simpler, more integrated approach to new-build mortgages
By Laura Sneddon, Head of Mortgage Sales & Distribution at Hinckley & Rugby for Intermediaries
There are many reasons why homebuyers at all stages of life consider a new build over an older property. But whether it’s because a new build is more environmentally friendly, built with comfort in mind (you haven’t lived till you’ve tried underfloor heating), easier to adapt for reduced mobility, or various other good reasons, there is one constant: their mortgage needs are no less standard than their motivation.
Most lenders offer standard mortgages, but how many borrowers these days actually fit the limited criteria to qualify for ‘standard’? Certainly fewer than ever before if we’re talking about first-time buyers, and especially those purchasing a new build.
A generation ago, homebuyers typically only took out a mortgage with their spouse or partner, and first-time buyers were largely younger couples or single professionals, moving up the property ladder as their careers progressed and families grew.
A new build has always offered that combined demographic several advantages, particularly the maintenance-free aspect that comes with a new build in the form of building guarantees. This enables the homebuyer to control ongoing costs, having worked so hard to put together a deposit and, often, having stretched affordability to achieve their goal.
However, today’s market is characterised by spiralling house prices, stricter affordability tests, and a cost-of-living crisis that still impacts many people. The result is buyers looking at increasingly creative solutions to get on or move up the housing ladder, because many people simply need more than the very basic criteria that tends to qualify for ‘standard’.
Of course, I’m not talking about truly non-standard requirements, like a specialist product for individuals with credit issues or complex incomes. There are specific solutions that are designed to meet those needs. But when you think about it, there are certain common circumstances these days that are far more ‘standard’ than they were for previous generations.
Which begs the question: wouldn’t it just be a lot simpler if those needs were wrapped up into a new, more integrated standard – a broader set of flexible core criteria that fit a much wider range of homebuyers?
For example, Joint Borrower Sole Proprietor (JBSP) has evolved in recent years. It is no longer mainly just used by parents to help their children onto the housing ladder – it has become much more multi-generational. JBSP also supports the unique benefits of a new build, because the expectation of being able to control future costs (much more difficult to predict with an older property) provides a high level of confidence for those adding their names to the mortgage.
What’s more, getting a mortgage may involve pooling resources with wider family members, friends or business partners, or even just between friends. In fact, we are seeing an increasing number of mortgage applications from friends, enticed both by the green aspects of a new build over an older property and by the deposit contribution scheme that is often offered with a new build. Using that as a springboard to pool resources, these young people are able to escape the rental trap and get on the road to building equity.
We also find that having a tailored term option in our Core range helps when multiple applicants want to share responsibility over different time frames. This can enable, for example, grown-up children to support parental desire for a new, more convenient home, such as a newly built bungalow. Providing all the benefits of being built to modern insulation standards, as well as the maintenance-free aspect of a new build, such a move can be hugely reassuring and beneficial later in life when confronting mobility issues and a need for increased comfort.
Despite all this good news for those seeking to buy a new build, serious questions remain over availability as we head into the second half of the 2020s. It is certainly encouraging that the government’s target for the current parliament is 1.5 million new homes, but deeply concerning is the expectation (cited by many sources) that this target is likely to be missed by at least 388,000 new homes. With all the challenges currently facing homebuyers, what they need more than anything else right now is urgent action to ensure that the government’s target is met.
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