Supporting borrowers with new builds
By Chris Holcome, New Build & Key Account Manager at Bluestone Mortgages
As the year ticked over to 2022, large numbers of housebuilders had reported solid forward sales positions which in large were driven by demand outstripping supply. For many consumers New Build properties are preferred over second hand homes. The majority are built to a B EPC rating, which can save hundreds of pounds in energy costs without the need to spend thousands of pounds retrofitting a property to achieve the same rating. They can have the carpets they want and the latest top-spec technology in place the day they move in.
The New Build sector has faced its challenges as every other part of the market has, and no doubt it will continue to do so which will impact lenders and brokers alike. Forward selling, delayed build times, supply issues, shortages in skilled labour and what some describe as a challenging planning process, it’s no wonder that according to the latest insight from Unlatch the 2021 Government new build target was short by almost 120,000 short. With Help to Buy nearing its end, the planning process remaining difficult and increasing costs, supply of new build properties will likely continue to be outstripped by demand.
With inflation on the rise, which has now hit 9% and with some economists suggesting it will reach double figures, it is possible that the Bank of England base rate will rise again following the increase to 1.25% in June 2022. Many borrowers will not have owned a property in an increasing interest rate environment. It’ll seem impossible for many to think back to 2007 when the base rate reached 5.75%. Both increasing inflation and rising interest rates will mean meeting lenders affordability assessments is even more of a challenge.
The combination of the demand for new build properties, challenges borrowers face in meeting lenders affordability assessments and many having experienced some form of credit blip or having complex incomes means that advice has never been as vital as it currently is.
Supporting borrowers, whether first-time buyers or homemovers, to be in the best position before they start the home buying process is a challenge for lenders and brokers alike. Making sure they understand what they can afford to buy, knowing about the possible impact of rising interest rates and cost on their potential affordability, and what lenders are available to them based on lender criteria is crucial to help put them in the best position for when they find that new home.
The role of specialist lenders is helping those who are traditionally underserved by the high street. Many of these borrowers may think that their circumstances make them ineligible. Criteria on Completion, available through Bluestone, allows the applicant’s position at completion, not at the point of application, to be considered at the point of the DIP or application being submitted. This could mean moving a client to a better credit tier, increasing the LTV available, reducing the interest rate payable or even giving a Decision in Principle to reserve a property another lender would decline. It allows for the issuing of an offer which allows an exchange within the required 28 days, with a condition to delay completion until they fit criteria or the tier offered on.
Higher LTV’s, trying to find a way to assess whether a first-time buyer can afford their rent, which is often equal to, or sometimes more their expected monthly mortgage repayments, and reflecting this in a lenders affordability assessment, supporting the various affordable housing schemes, improving service and certainty of a lender issuing an offer are the types of opportunities specialist lenders will be looking at.
New Build and affordable housing are key to solving the ongoing housing crisis in the UK, it’s already apparent that innovation and product development is occurring which is great for consumers, specialist lenders are and will continue to be in a prime spot to support these borrowers even more.
Understanding the lenders in the new build space, how they differ and what solutions they offer is going to be essential for intermediaries. It’s likely to become such a specialised sector that a lender’s BDM will be as important as a best friend.
The market is constantly evolving and there are certainly more ideas to support intermediaries so be sure you know who your BDM at Bluestone is, pick up the phone and find out how Criteria on Completion can work.
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