How quickly things can change in the mortgage market. All of us must come together to do our best for customers.
This applies to the new-build sector, too. In the coming months, it will need to overcome a series of hurdles: not just an uncertain economy but a shortage of skills, supply-chain disruption and the end of Help to Buy (HTB).
We shouldn’t forget that Covid-19 had an unprecedented effect on the economy. There was a major slump in housebuilding, with construction levels on a par with those of the financial crisis.
There are challenges but also plenty to be positive about
Housebuilders have since started to turn up activity and increase the construction of new homes that the country needs, but it’s still not enough to make up for the fall in construction levels during lockdowns, nor to meet demand.
Balancing supply against demand has been made more challenging by disruption to global supply chains, rising prices caused by the post-pandemic surge in demand, and more recently the impact of geopolitical events.
Figures from the Construction Products Association suggest the cost of construction materials and components has risen by 42%.
Although consumer interest in new-build is extremely high (helped by the constraint on supply), the rising cost of living and increase in mortgage rates implied at the start of October are likely to dampen demand.
Success relies on support from Westminster. The new minister must wipe the slate clean and produce a comprehensive plan
In addition, the Construction Skills Network suggests the industry will need a million extra workers by 2026. Yet recent figures show the sector lost roughly 175,000 workers last year.
We need to train more site managers, bricklayers and carpenters to play their vital role in delivering the homes this country requires.
End of Help to Buy
The new-build sector is also preparing for its biggest change in the past decade as HTB, which has supported more than 360,000 housing transactions since launching in 2013, winds up. Buyers have less than a month to complete their applications for the equity loan scheme.
The end of HTB has been a cause of concern for some, removing an important new-build support mechanism, particularly for first-time buyers.
There are challenges but also plenty to be positive about in the new-build market. For brokers helping borrowers to buy new-build homes, there are other initiatives waiting in the wings to help clients, aside from HTB. Advisers will want to consider new government initiatives, such as the Starter Homes programme, which offers a 30% discount on market value.
Green products in our market cannot thrive without a suitable number of new homes to support them
Another scheme, Deposit Unlock, is exclusive to new-build homes and offers loans to support deposits for homes of up to £750,000, helping borrowers effectively gain access to a 95% loan-to-value mortgage for a new home from 24 homebuilders. Just three lenders currently support Deposit Unlock, meaning shared ownership and 95% LTV mortgages are still largely preferred. Deposit Unlock will need much more support from lenders if it is to become a viable replacement for HTB.
Despite all this, demand for mortgages remains strong. In the context of increased economic risk and higher mortgage costs, Legal & General Mortgage Club’s latest SmartrCriteria figures showed some impressive resilience, with more than 24,600 searches by advisers for products in September, a figure close to previous months.
Energy efficiency
It has also been fantastic to see the new-build market rightly contribute to ongoing discussions around how the property industry can reduce energy consumption and drive efficiency. Building new, green homes and supporting these with green mortgages will require insight and action from the government, lenders and builders alike.
Green products in our market cannot thrive without a suitable number of new homes to support them, while eco-friendly mortgages and homes need direction from the government to ensure they align with its overarching net-zero plan.
The cost of construction materials and components has risen by 42%
These challenges, and opportunities, all come as a new housing minister settles in. The new-build sector must continue to do its part, providing the homes and mortgages that buyers need to step onto and up the ladder. But success also relies on support from Westminster. The new minister must wipe the slate clean and produce a comprehensive plan that promises collaboration with homebuilders and lenders to tackle these issues head on.
Consumer interest in new-builds remains very strong. We must ensure we have the supply of homes and mortgage products to meet the demand.
Danny Belton is head of lender relationships at Legal & General Mortgage Club
