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Brokers - what is the state of the new build market?

Journalist: John Fitzsimons, Freelance

ended 27. February 2024

Morning brokers

We would love to get your thoughts on how things are in the new build mortgage market at the moment. Last week we had Virgin and Halifax announce partnerships with OwnNew, with the idea of delivering more competitive rates to those buying a new build (https://www.mortgagesolutions.co.uk/news/2024/02/23/virgin-money-and-halifax-team-up-with-own-new-for-low-new-build-rates/), but is this enough?

  • What is demand like from your clients for new builds?
  • What is the level of choice like when it comes to mortgage products? Are there particular lenders that stand out, and why?
  • Is there a need for more innovation, such as these OwnNew partnerships?  How else could lenders innovate which would make a tangible difference to your new build clients?

All thoughts very welcome!

7 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
There will always be a great demand for newly built properties, from first-time buyers who like the blank canvas of a new home, to those who don't want to mess about with long property chains that can go wrong at the last minute. Mortgage lenders are looking to better support first-time buyers, lowering deposits needed to just 5% for both houses and flats, as well as this new OwnNew arrangement soon to be introduced. High Street lenders such as Barclays and Santander are offering smaller deposit options, whilst Halifax and Virgin are involved with OwnNew. This improved support will inevitably make it more attractive to buy new, but buyers need to be aware that new build prices are normally higher and you may have some negative equity in the early years of ownership.
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Michelle Lawson
Director at Lawson Financial
New builds are essentially over-priced. The developments I have seen are usually hemmed in, little parking etc to cram as many properties on a site as possible and, as news articles have shown, the build quality is usually poor. Most buyers have issues post completion with the properties that need addressing. Sites tend to chase the massive profits by building executive homes rather than providing a good mix of all including a generous proportion, rather than a token gesture, of flats and smaller houses for starter homes. New Build generally comes with a premium that some buyers are getting wiser too however some will still prefer the convenience of shorter chains and a turn key property. In my opinion, the developers need to change tack and review what the market or area wants rather than the shareholders. There are some great innovative mortgage products and schemes which suit some borrowers too.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Demand for new builds has always been pretty consistent, given that they always have more incentives than buying second-hand, and many first time buyers are attracted to the new, shiny and customisable nature of new build homes, thinking probably wrongly that these come with less maintainence and issues. However, latest reports show that snagging lists are bulging with issues, and incentives such as Help to Buy have ended, so whilst demand is strong, the ability for potential buyers to afford and obtain the new build properties has reduced.
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Robert Timm
Managing Director at Sunland Mortgages
I think new builds will always grab the attention of buyers, in my experience particularly younger first time buyers seem to like the idea of buying a home that nobody else has lived in, and very little needs doing in terms of immediate renovation.

I think lenders have recently been improving criteria to assist new build buyers, including reducing loan to values on new build flats, making them more accessible.

Of course the key drawback from the past few years has been the removal of the Help to Buy scheme with nothing replacing it. That was a hugely important scheme that helped thousands onto the ladder into a new build home, and nothing since has come close to having as much of a positive impact for buyers.
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Akhil Mair
Director at Our Mortgage Broker
There's a growing interest in new builds, although common concerns persist about pricing, build quality compared to older properties, and availability of high LTV mortgages for apartments.

The number of mortgage deals is increasing, especially for properties with EPC ratings of A-C and higher loan-to-values. Lenders offering incentives like contributions towards deposits and stamp duty stand out.

More innovation is welcomed, particularly in offering flexible criteria for self-employed individuals and those with adverse credit profiles.

As for further innovation, providing upfront low-cost solutions with options for interest-only payments and developer contributions could greatly benefit new build clients.
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Gary Bush
Financial Adviser at MortgageShop.com
Our feelings and advice for our applicants is that New Build properties are being sadly sold at a massive premium, and unless you really LOVE that "Oooh it's all new and fresh" sensation buying resale is a much better option financially. The new initiative isn't really something for a longstanding financial advice firm to get excited about as it will only benefit a very narrow part of society and in our opinion the order of benefit will be Building Firm, Lender, and then potentially, and it still remains to be seen, the Homebuyer. The government would be better placed at taking another look at their existing Shared Ownership arrangements and removing a lot of Housing Association draconian conditions rather than further new build meddling.
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Mark Robinson
Managing Director at Albion Forest Mortgages
We are seeing an increase in new build enquiries lately. However, the sites appear to be overvaluing their properties, as we are seeing a significant number of down valuations in this area.