In Text with JD: The need for innovation in the new-build housing market

When we think about the government’s housebuilding target of one-and-a-half million new homes, we instantly focus on the new-build sector and spades in the ground. While not directly linked to increasing supply, it is just as critical that we continue to prioritise innovation in this massively important area of the market.

Proactive lenders driving innovation through their products and criteria gives advisers greater options to support a broader range of borrowers – increasing access and driving demand. Putting new build and homeownership in reach of more borrowers – particularly first-time buyers – not only helps grease the wheels of the entire housing market, it helps propel the wider economy too.

Without any real government support in recent years, lenders and developers have arguably been left to do the heavy lifting to support borrowers. It’s been the case since the end of Help to Buy – a scheme that showed the potential of a government-backed equity loan scheme, delivered through powerful partnerships between lenders and developers.

You cannot deny its success in facilitating new-build transactions and getting people onto the housing ladder – leveraging innovation to improve affordability and increase access. Although shared ownership does a great job in filling the void, along with similar equity schemes from lenders and developers, the sector arguably misses a scheme that has the high-profile awareness and recognition of Help to Buy.

Speaking recently with Rachael Hunnisett from April Mortgages, she agreed that the new-build sector has been calling for greater innovation since Help to Buy closed. April has been making headlines this year with its Dutch-style mortgages and 100% offering. April made its debut in the new-build sector in September.

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As one of the country’s largest specialist new-build teams, we are always pleased to see more innovation in the new-build space and another lender looking to support. Ahead of its launch, we were delighted to support Rachael and the team at April in understanding the new-build ecosystem and quirks of new-build transactions. From there, they were able to really recognise the nuances, shape their proposition and develop a full raft of resources to support both brokers and consumers in understanding how their style of product works in this context.

The result is a proposition that brings high-loan-to-value (LTV) lending of up to 90% to the new-build space with high-loan-to-income (LTI) ratios of up to seven times the applicant’s income, all while flexing to allow for developer incentives and gifted deposits without restricting the overall LTV or loan amount. That’s in addition to automatic rate reductions as the LTV improves.

Speaking with Rachael, it is the longer-term fixes of five, 10 and even 15 years that she believes enable such innovation. With higher LTI and LTV lending often perceived as a riskier segment of the market, they provide greater security for lenders and stronger protection for borrowers against market volatility. With lower deposits, higher-LTI ratios and the ability to redeem in full at any time with no early repayment charges (ERCs),

Rachael believes that the proposition better reflects modern life and supports borrowers not just to buy, but to keep their home and have long-term stability for the future.

Affordability has been the hurdle for new-build sector

Given April’s success with its 100% mortgage product, I’m intrigued to see if this product eventually arrives in new build.

Despite my best attempts to land a scoop, Rachael kept her cards close to her chest on any future plans. I, for one, would certainly welcome it – particularly given the responsible and well-structured way April has developed it.

Like any part of the housing market, success in new build comes down to three ‘A’s working in tandem – appetite, affordability and accessibility. While the recent Budget has caused some hesitation, the appetite to buy is certainly not an issue. The real hurdle in recent years has been affordability and an urgent area where innovation has been needed. Finally, though, well-thought-out, low-deposit mortgage options are helping to answer this in the new-build space. Making these available through chosen intermediary partners means they are accessible, all while ensuring borrowers gain the right advice in this critical segment of the market.

While there may be little confidence around the government’s ability to actually deliver on its ambitious target of one-and-a-half million new homes, it won’t be for the lack of effort, innovation and collaboration in the mortgage market to increase pathways, enhance affordability and drive demand.