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How lenders can adapt to changing building styles

by: Richard Pike, sales and marketing director of Phoebus Software
  • 13/03/2017
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How lenders can adapt to changing building styles
The Housing White Paper discussed releasing more land to build on, building more housing stock and providing more affordable housing, but there was a lack of practically on how it would make this happen.

One proposal is to increase the use of modern construction methods such as offsite manufacturing.

While these construction methods may well help to provide housing more quickly in the short term, there is still the potential issue on whether mainstream UK mortgage lenders will be happy to lend on potential new non-traditional construction types.

Lenders, understandably, will always want to know their security is safe, and that these properties will not react to standard housing market appreciation and depreciation any differently to the rest of their housing assets.

Depending on the quantity of new homes built in non-standard construction types, and until analysis is available to see how valuations are holding up, pressure to provide mortgage funding to borrowers may well mean that lenders will restrict LTVs initially.

This could affect first-time buyers who often buy more new builds than secondary home movers; they could potentially need to put down a bigger deposit on these new properties than on those of standard construction.


Trans-Atlantic education

Globally, non-standard constructions such as modular housing are mortgaged without any major issues as they are often the norm in the market. Take the US where 30-year fixes are readily available at standard LTVs.

What is interesting over there is modular properties are treated similarly to UK self-builds with staged advances granted as the property goes up. Maybe this could happen in the UK as an option if this type of construction becomes popular?

Of course, there is nothing to suggest that in 50 years’ time, modern new construction types will end up in a post Second World War state of dilapidated pre-fabs we sometimes see today.

However, these pre-fabs were built to solve the housing issues back then, and it is interesting that some of the pressures are now seemingly the same and similar solutions are being suggested as a resolution.

Read more on the Housing White Paper from Mortgage Solutions coverage.

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