The lender will now only offer mortgages on self-built properties which are already fully completed and in a habitable condition, essentially removing it from the self-build market as mortgages are typically taken out during the building process.
It had previously lent on self-build properties during the construction process, when they were either wind and weather tight or plastered out.
A Virgin Money spokesperson told Mortgage Solutions that the lender had seen ‘very little demand’ for self-build products.
“Self-build made up a very small percentage of our lending,” it added.
This withdrawal is seen as a blow to the government’s plans to use the self-build sector to stem housing shortages. Despite heavy promotion from housing minister Mark Prisk and his predecessor Grant Shapps, just 12,000 people were able to complete a self-build project in 2012.
Jon Hall, CEO of Saffron Building Society, said: “The value of self-build to the construction market is £2.3bn meaning that it makes an important contribution to economic recovery, which is why the government is keen to support self-builders by giving them exemption from the new Community Infrastructure Levy.
“Virgin has presumably decided to abandon self-build because it is not a mass-market, but it is nonetheless an important sector which is why Saffron Building Society is continuing to support it.
“There is a real danger that large lenders simply target mass mortgage markets and, in so doing, create real problems for borrowers facing special situations. I believe it’s important that lenders continue to support valid markets such as self-build.”
Raymond Connor, chief executive of BuildStore Financial Services, added: “We are disappointed with Virgin Money’s decision to withdraw from self-build lending, but given the limited nature of its product – only lending and releasing funds once the property is wind and watertight, which is a relatively late stage of the build – it is not surprising that they have seen very little demand from self-builders.
“In our experience, self-build customers require funding from day one, and a positive flow of cash to help them purchase their plot, and commence construction. We continue to work with lenders who understand this cash-flow need, and can provide that type of funding.”
Elsewhere, Aldermore will now lend on new build flats in owner occupier cases.
