Mortgage lenders no longer fear to tread the new-build path
Sunday 29 April 2012
Lenders are gearing up to relax their criteria on new-build property, mortgage industry insiders have said.
Last week, one of the UK's biggest mortgage lenders, HSBC, said that it would be increasing the loan-to-value (LTV) on new-build property from 75 per cent to 85 per cent. At a stroke this means that buyers will need a much smaller deposit than in the past to be able to buy new home.
The move followed the recent launch of the Governmentbacked Newbuy scheme which will see the approval of mortgages with a loan-to-value of up to 95 per cent.
HSBC said that it believed the new-build market had stabilised and it was now safe to raise its LTV. New-build properties were widely seen to be in the forefront of the general housing market crash which began in 2008 and is still hitting prices in some parts of the UK. It was presumed that the price premium that attaches to new- build made them particularly prone to price falls and potential negative equity.
"This perspective seems now to be changing," said Samuel Warren, a director of residential development at Chesterton Humberts. "And HSBC being such a big name in the market is a crucial indicator that in future it may well be possible for buyers to get a bigger mortgage on new build property than in the recent past."
Andrew Montlake, a director at mortgage broker Coreco, said he believes other lenders may follow HSBC: "Undoubtedly, lenders are looking a bit more kindly on new-build. The dire predictions in 2008 and 2009 have not come to pass and the market seems relatively stable.
"Lenders want to avoid being out on their own with a higher LTV, as they would be inundated with potential borrowers and be unable to cope. But now HSBC has moved it gives others a free hand," Mr Montlake said.
Generally, LTVs fell to around 75 per cent in 2008 and 2009 and have stayed there ever since. "The new-build market has really cleaned up since 2008-2009. Any incentives given to buyers are now fully disclosed and there are far fewer white elephant developments," said Richard Sexton, a director at Esurv, the largest provider of valuation services in the UK.
"Also, a couple of years ago new-builds were repossessed more than average, now it's less than average. The market is on a far more even footing and lenders can see this happening and are upping their LTVs," Mr Sexton added.
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