You are here: Home - News -

The challenge of mortgage lending on micro homes

by: Christopher Menon
  • 21/08/2017
  • 0
The challenge of mortgage lending on micro homes
Research from consumer organisation Which? has found that micro homes, defined as properties smaller than 37 square metres, are being increasingly built, bought and sold, creating a possible conundrum for lenders.

For example, according to the Which? research, approximately 8,000 such micro homes were built in 2016. However, with several of the major lenders, including Nationwide Building Society and RBS, not lending on properties smaller than 30 square metres, this can cause a problem for potential buyers.

David Blake, principal mortgage adviser, Which? Mortgage Advisers said: “With the average London micro-property selling for £279,000, smaller homes can represent a more realistic opportunity for many but can also be harder to mortgage.

“Smaller properties can put lenders off due to concerns around the future value of the investment. However, there are mortgage lenders who are receptive to properties of this nature, if demand is high enough and sustainable.”

 

Reassess criteria

Ray Boulger, senior mortgage technical manager at John Charcol commented: “Pretty much every lender has a restriction on size for studio flats, and micro flats could be considered a sub-set of these. However, if there continues to be significant new developments of such flats, lenders may have to reassess their criteria.”

He explained: “It’s all about saleability. If the flat is repossessed could it be subsequently resold? Provided there is good demand some lenders will be prepared to lend but will perhaps reduce the Loan to Value (LTV) to 75%.”

This appears to chime with the experience of modular flat provider Pocket Living. It supplies “compact” 1-bedroom flats that are 38sqm, which it was at pains to point out “complies with national Space Standards and are therefore not micro”.

The builder added: “Pocket buyers haven’t experienced any difficulty in obtaining a mortgage because of the size of the homes.”

There are 0 Comment(s)

Comments are closed.

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
  • RT @robjupp: Great day yesterday for donations to @MortSleepOut. With Gift Aid, we are now close to £17,000. It would be great to get to £2…

Read previous post:
Retirement Advantage unveils BTL and second home equity release products

Retirement Advantage has launched a range of equity release products for owners of buy-to-let properties and second homes.

Close