The architect of the initiative, Capita Asset Services, has been in talks with the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) to drum up support for its Custom and Self Build scheme.
When local authorities agree to release land to aspiring homebuilders they run the risk that the project may stall because the property fails to meet the mortgage lender’s standards or the mortgage lender withdraws funding before the project is complete.
Still in its early days, the aim of the scheme is to remove the uncertainty of the staged release of mortgage finance which lenders supplying self-build finance typically insist on doing.
Capita’s initiative will involve the mortgage being agreed upfront by a participating lender. After the borrower pays a deposit of 5% of the total cost of the land and build directly to the local authority, the local authority will fund the build until completion.
Once the home is built the mortgage lender transfers the funds to the local authority to repay the costs and places a charge on the newly-built property, which the borrower services as a standard mortgage.
As yet no local authorities have officially agreed to join the scheme but Capita’s director Cecilie Booth said with backing of such a large lender she was confident it would become popular.
“We are already in talks with over 100 local authorities, and we have attended 11 regional seminars so far and we are planning some further events in the near future.
“We are already speaking to a number of additional lenders and have attended several meetings with the CML and BSA and presented to their members. I am very hopeful we will have more lenders on board shortly now we have successfully launched with Lloyds”
Stephen Noakes, mortgage director of Lloyds Banking Group, who has been a long-term supporter of boosting self-build developments in the UK, said he was extremely pleased the bank was supporting the new scheme.
LBG was not able to release details of its offering to Mortgage Solutions as it is still under development but lending will be subject to its normal lending criteria and will adhere to any rules put in place by local authorities.
Although consumers will be able to access products directly it is expected that the scheme will be delivered largely through mortgage intermediaries once it is launched.
