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New-build specialist brokers defend criticism it’s a ‘closed shop’ – poll result

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  • 11/10/2017
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New-build specialist brokers defend criticism it’s a ‘closed shop’ – poll result
Intermediaries are divided on whether the new-build market should be viewed as a specialism, with some arguing that the current ‘closed shop’ may not be delivering the best result for borrowers.

This week Mortgage Solutions polled brokers on the number of new-build cases they have completed over the past month. While one in four have completed between one and four cases, and 13% have completed five or more cases, the majority, or 58% of intermediaries have not done any new-build business in the last 30 days.

Daniel White, managing director of White Financial Services, said that intermediaries are engaged in a “constant battle” with developers who push buyers towards recommended advisers, arguing it was understandable if brokers did not want to be involved in new-build as “why should you have to constantly defend your advice with your own client to a sales office?”

He continued: “Given my personal experiences with developers this year, I genuinely believe that if we all adopted an attitude where the client’s best interests were genuinely at heart with no hard sales tactics, then advisers, developers and lenders could all work together to create a very strong proposition to the industry, which would in turn help create an ambiance without bitter feeling towards new-builds.”

Open up the closed shop

David Sheppard, managing director of Perception Finance, agreed, noting that he had lost out on business due to builders having tie ins with certain brokers that they push clients to use.

He continued: “It is not a case that brokers are not engaged with the new-build market but more that they may not get much of this business due to the relationships that builders have.”

Paul Flavin, director of Zing Mortgages, described the new-build sector as “a closed shop”, often to the detriment of the borrowers.

“I can understand the developer’s need to tie-up sales as soon as a development is released and also understand that they need to be as sure as possible that the application will reach completion as quickly as possible, but I do wonder how many applicants miss out on that dream new-build just because they weren’t ‘vanilla’ enough to get across the start line,” he added.

“It’s only when schemes like Help to Buy are thrown into the equation that some of these people have the time devoted to their application to secure the purchase.”

More to new-build than Help to Buy

However Alastair McKee, managing director of One 77 Mortgages, defended developers’ use of partner brokers, saying that he has seen plenty of clients who have gone to brokers who are not familiar with the specific new-build criteria and end up making mistakes with the forms, causing deals to collapse.

He continued: “No broker is going to pass a client over to a new-build specialist, but that doesn’t always get the best result for the customer. We have access to deals that other brokers don’t; a borrower can come to us with a 5% deposit, and then not need to use Help to Buy, they can own the property outright. Another broker might not have access to those deals, so would have to go down the Help to Buy route.”

Helen Pierson, head of business development at Mortgage Bureau, agreed that the new-build market should be viewed as a specialism, arguing that not all brokers “will be geared up for it, or able to provide the seven-day-a-week service that this market demands”.

She added that the market is crying out for more innovation from lenders in their product design, particularly at high LTVs. “I know that the government has just announced further Help to Buy funding, but we really need lenders providing products that will allow new-build purchases without the use of a scheme but with a small deposit, and there aren’t many of those around. Well done to the likes of mutuals Principality and Skipton who have had the nous to break from the pack and offer 90% LTV.”

Craig Hall, new-build manager at Legal & General Mortgage Club, said that the growth of the sector meant it was likely to attract more lenders, concluding: “At the moment, there are 20 lenders supporting the Help to Buy equity loan scheme and many more looking to join this scheme and shared ownership. The market is definitely getting more competitive and we predict that this will only increase.”

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