Opportunity knocks: Why now’s the time to break into new build

There’s an opportunity for brokers to broaden their client base as the new build sector is set for growth.

The government has made significant promises regarding homebuilding in its initial months in power. It has committed to constructing 1.5 million new homes during this parliamentary term and aims to deliver the “biggest increase in social and affordable housebuilding in a generation”.

The government plans to update the National Planning Policy Framework, reintroduce mandatory housing targets, and initiate a programme of building new towns. These initiatives are part of a broader array of announcements and funding pledges made in the recent Budget.

That’s great news for the new-build sector.

But the government faces some challenges with housebuilding numbers in previous years nowhere near the level required to hit the new targets. 

Mountain to climb

The latest quarterly homebuilding figures show that, between 1 July and 30 September 2024, the number of new starts was 29,310. This is up 17% compared with the previous quarter and 38% year on year, but still a long way from where we need to be.

On an annual basis, there were 221,070 net additional dwellings in England in 2023-24, a 6% decrease on 2022-23, and 11% down on the most recent peak in 2019/2020. 

It’s an understatement to say that rapidly increasing the construction of 300,000 new homes per year will be challenging. However, the fact that the government has made housing a central pillar of its growth strategy and is committed to reforming the UK’s planning process as part of this effort is a positive move.

Setting this ambitious target has already galvanised the sector and set the tone for a renewed focus on building.

Overcoming barriers

No one is under any illusion about the scale of the challenges ahead, but work is already being done to overcome them.

There are supply chain problems and significant skills shortages in the construction sector that need addressing. 

Ongoing planning constraints are one of the biggest barriers to building, alongside nutrient neutrality rules, both of which are already being tackled as part of the government’s planning reforms and work to unlock stalled sites, with the Local Nutrient Mitigation Fund.

House price inflation and high rates continue to squeeze affordability, making it harder for many first-time buyers without parental or government support to purchase a home. However, the government has committed to working with the mortgage industry to make the Mortgage Guarantee Scheme (which is set to end this June) a permanent feature under a new name, Freedom to Buy.

Sustainable revolution

New build homes are also at the forefront of the sustainable housing revolution and are already highly energy efficient, with most having an A or B EPC-rating. 

The Future Homes Standard is also set to come into force this year and goes even further. It will ensure that all new homes are built to produce 75%-80% less carbon emissions than under the current Building Regulations.

Alongside the growth of sustainable homebuilding is the increase in the green finance sector to support energy-efficient homebuying choices, which has been slowly but steadily gaining pace over the past five years.  

What it means for brokers

The new-build sector is poised for growth, offering substantial opportunities for mortgage brokers. By expanding your market coverage, you can maximise your client base and establish yourself as an expert in this burgeoning field. 

New-build mortgage borrowing demands a specialised understanding of its unique nuances, from tight timescales to the complexities of various home ownership schemes. Shared ownership, for instance, is on the rise alongside a range of other government and private homeownership initiatives. 

Mortgage brokers are ideally positioned to help clients navigate and benefit from the mortgage products available to support these purchases.

By becoming more knowledgeable about the new build market, you can make the most of the potential growth of this sector while helping your clients get the right product for their needs. 

How Virgin Money can help

Virgin Money can help you do this. We have a depth of knowledge in the new build sector including the differences in time constraints, incentives and documentation involved. We’re experts in this market and have strong relationships with the major developers as well as smaller builders.

We’ve also designed lending products to meet the specific needs of borrowers in this sector, from high LTV mortgages to longer terms of up to 40 years to boost affordability. 

We support buyers using the Shared Ownership scheme, enabling your client to borrow up to 95% of the share purchased for properties including new-build houses and flats, and choose from two- and five-year fixed rate mortgages, with fee-free and cashback deals available. 

And we offer the innovative Own New Rate Reducer mortgage, which enables new-build buyers to use a 5% developer incentive budget to reduce their monthly mortgage payments over the fixed term of the product selected. 

Our Greener mortgages support energy-efficient buying choices, which are often part of new-build homes. It means your client can access a lower rate than with our core range for buying an A- or B-rated new build. 

Ensuring you understand all of the buying and borrowing options available to your clients can mean you are on the front foot and are ready to support them into a brand-new home of their own.

To find out more about our new build lending products from Virgin Money and Clydesdale Bank, get in touch with your dedicated Business Development Manager and they’ll do everything they can to help.

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