As such, even if they appear suitable and affordable, applicants wanting to buy these types of properties may not be able to find a finance provider. So why are some lenders wary of certain builds, and what do brokers need to be aware of when advising clients?
Although ex-local authority properties often represent good value for buyers, they can also create challenges when it comes to the mortgage application. The truth is that there is still nervousness surrounding these properties, in part due to difficulties with certain types of construction used and also concerns over re-saleability.
Lenders can offer a lower LTV on these properties to de-risk the transaction meaning that clients may need to find a larger deposit than originally planned. It is therefore important for brokers to raise this issue sooner rather than later, if there is thought to be a concern.
Those hoping to buy ‘prefab’ homes can often face similar challenges. Built in the 1950s and 60s as a solution to the post-war housing crisis, these properties quickly earned a reputation for being ‘cheap and cheerful’. Although many are still standing, these homes weren’t necessarily built to last, and construction can be considered less robust than modern day standards. Brokers should therefore recommend an early discussion with the lender in order to determine whether this could hinder a client’s application.
Over the years, a number of construction types have proved defective and lenders have in worst case been left without any security. However, Modern Methods of Construction (MMC) have come a long way.
Today’s industry has made great advances in the production of off-site modular housing and MMC. Both have the potential to help alleviate the UK’s housing crisis, enabling homes to be built far more quickly and effectively.
Because they are sustainable and often more energy efficient than standard construction, many assume that it will be easy to secure a mortgage on MMC properties, but for new schemes, lenders aren’t always keen to be the first to lend, leading to a chicken-and-egg stalemate.
A report by the Building Societies Association offered the view that MMC was now a completely different animal to the prefab homes of post-war Britain, and that the reputation it has earned across the industry needs to change.* Brokers should therefore suggest consulting a surveyor who should be able to identify if a particular property will be accepted by lenders.
Innovative developers are to be encouraged but crucially also need to engage with lenders and surveyors in order to help them understand the benefits of each new construction type at the earliest stage in the process. This will help speed up acceptance of suitable new methods, for the benefit of all.
*Source: Building Societies Association, November 2016