The new build market has certainly dominated headlines since the general election. Making a pledge for 1.5 million news homes across the next five years was always going to be a conversation piece and continues to feature regularly in national media bulletins as well as the meetings and conversations we have with brokers and builders.

Most inject a little scepticism about the numbers, but we know from speaking to our intermediary partners that the vast majority (83% to be precise) expect new towns to significantly reshape the housing market in the near future.

Of course, no conversation about housing can be complete without a discussion on affordability. This was brought to the fore in the Chancellor’s June statement, where the tie between the New Towns initiative and the Affordable Homes Programme was laid out.

A key goal is to provide 40% affordable housing through a mixture of options – social rent, affordable rent and shared ownership. With the end of Help to Buy and the Mortgage Guarantee Scheme, buyers – especially those without the backing of the Bank of Mum and Dad will be eagerly awaiting the details on what this could mean for them.

Affordability challenge

Affordability tends to be the biggest issue for customers and particularly first-time buyers (FTB), and the Government announcement does challenge us to think about how we, as a lender, could be doing more to support.

There are lots of tools at our disposal, for example we recently enhanced our affordability for those looking to buy a new build property. The change means that a buyer could borrow between £4,000 – £5,000 more – when coupled with the option to borrow at 95% LTV on new build houses and flats, we start to see how this could make all the difference to a buyer.

The demand for lender support like this is evident when we look at the numbers. We currently see 43% of our new build cases within the 90% and 95% LTV bracket.

As lenders we must also acknowledge the role of incentives in the new build market, for example where builders are willing to support transactions with ‘cash incentives’. The familiar request of “90+5+5” is prominent in the cases we review, where the customer and builder provide 5% each to move the case from 95% to 90% LTV and access lower, more affordable rates.

We can find ways to get creative outside of affordability policy too. For example, stamp duty remains a hot topic, following the changes we saw in the Spring. The threshold for a FTB to pay SDLT has lowered from £400,000 to £325,000 in England and Wales – the average price we see on a high LTV new build case for a FTB is £345,000.

The right incentives

There is a key role for mortgage brokers here. Working with builders to maximise incentives and – importantly the right incentives for customers – can make the difference between a purchase being affordable and not, and allowing funds saved for SDLT and legals to be diverted to increasing the size of the deposit is of clear benefit.

As an industry we also can’t forget the more practical support for buyers. While the market is thriving, there’s always a chance of unexpected delays caused by material, illness or just the good old British weather turning against you.

Buyers of new build properties need to be extra vigilant of their mortgage offer validity, choosing a length of time that gives customers the security of a longer offer and mortgage brokers the knowledge they are highly unlikely to have to revisit their advice or choose a new rate after six months. That’s important when a customer is balancing costs and affordability, alongside seeking certainty in their budgeting.

There’s a lot to take in, so the role for the mortgage adviser is significant in this space. Buyers looking at a combination of incentives could find their choice of lender limited.

Likewise, seeking a higher LTV could reduce the pool you have to pick from with few mainstream lenders active at 95%. All that before we even touch on the topic of longer offers into the mix, product fees and the range of issues brokers juggle for their customer.

Paul McCarthy is key account manager at Santander UK