Broker warning after NatWest and Barclays announce they are increasing New Build borrowing to 95% LTV

BOTH NatWest and Barclays have said that they will look to support New Build home purchases to 95% LTV (loan-to-value), in a show of defiance to those who consider the property market is due for a major correction.
 

NatWest announced houses will see their maximum LTV increased from 90% to 95%, while flats will see their maximum LTV increased from 85% to 90%.

Barclays said the increase to LTV covers New Build houses with a maximum value of £600k. It added that the deposit must be sourced from the applicants' own funds, and that standard affordability and credit criteria apply.

At a time when the economy is struggling and inflation proving stubborn, experts are mixed as to whether this is a positive or negative move by the lenders.

Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, claimed it was “reckless” by the banks.

He added: “Offering 95% LTV on new builds is a reckless defiance of caution. A 5% buffer is instantly negated by the price premium fade. If Reeves’ Budget causes a price drop hit, negative equity explodes. 

“This risks mass borrower default and substantial losses for banks who are aggressively targeting the market’s riskiest segment.”

Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, agreed, adding: “Offering 95% mortgages on new builds is like buying a new car with borrowed money, you lose value the moment you sign.

“New builds typically sell at a premium that disappears once you move in, wiping out your 5% deposit instantly. If property prices drop even slightly, you’re trapped in negative equity before you’ve hung your first picture. 

“The Mortgage Guarantee Scheme protects the banks, not you. These lenders are scrambling for business whilst developers struggle with falling reservation numbers. 

“You’d do better saving for a proper deposit rather than rushing into a property that costs more than it’s worth. This move shows how badly the housing market needs genuine support, not risky lending that benefits banks and builders at your expense.”

But not all brokers were critical.

Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said the move will be of “serious interest” to buyers.
 

He continued: “Lenders are certainly hunting down the opportunities to lend, with the traditionally risky 95% loan-to-value new build mortgages back on the table of two of the UK’s largest lenders. 

“Barclays seems to be using the Mortgage Guarantee Scheme to provide this for houses up to £600k, which is for the lender’s benefit and not for the borrower’s protection. 

“Whilst the popularity of new-build homes has traditionally been strong, reservation numbers have been falling over the past few months, so this shift by Barclays and NatWest will be of serious interest to buyers and developers.”

Ken James, Director at London-based Contractor Mortgage Services, called it a “welcome hand for buyers”.

He added: “This move could open the door for thousands of buyers who have struggled to bridge the gap between savings and rising deposit requirements. However, there’s a wider structural issue at play: there simply aren’t enough new homes being built. 

“Even with more generous lending, demand continues to vastly outstrip supply particularly in the regions where affordability is most stretched. To some it may appear that this is just lenders scrambling for business in a fiercely competitive market. 

“Mortgage volumes have been sluggish and, as rates stabilise, lenders are being forced to look for new avenues of growth and new build lending offers exactly that. Ultimately, this policy shift by NatWest and Barclays is a positive sign both for buyer confidence and for the broader housing sector. But without a dramatic acceleration in new home construction, it’s a case of more fuel, same fire.”

Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, "welcomed" the move by the banks but also advised caution.

He continued: “As a broker, and former estate agent in South Wales, I welcome NatWest and Barclays pushing new build lending to 95% LTV, but let’s be honest: this is lenders chasing volume, not a sudden burst of confidence. I’ve seen new builds depreciate in the early years and list prices inflated with incentives that don’t always match true market value. 

“Down-valuations are common and, with only 5% down, buyers have very little buffer. And with the government miles off its home-building targets, demand is completely out of sync with supply — so lenders are stepping in to stimulate a sector that isn’t delivering. It will help some buyers, absolutely, but they need to understand the risks as well as the opportunity.”

Aaron Strutt, Product and Communications Director at London-based Trinity Financial, also praised the lenders.

He added: “The new build property sector needs all the help it can get at the moment just like much of the wider housing market, so borrowers and developers will be pleased that it has become slightly easier to get a new build property mortgage with these changes. 

“If Labour have any chance of meeting their housing targets, they either need to do something useful in the upcoming Budget to help first-time buyers and home movers, rather than just taxing them, or hope more lenders ease their new build home acceptance criteria.”

NatWest and Barclays have been contacted for comment.

Barclays

NatWest