So we asked this week’s Marketwatch panel about the broker opportunities and challenges within the new build sector and whether it’s an area that brokers should have specialist knowledge on.
Kelly McCabe, managing director of The Mortgage People
I find it crazy that in most other trades, specialism is a given, but in financial services, we try and wear every hat.
I have been working as a specialist for about 14 years, and I wouldn’t want to go back to dabbling in a bit of everything.
We are so focussed on giving clients the right advice, and yet, without an in-depth knowledge of every type of purchase out there, how can we be?
Our advice is a lot broader than just a specific mortgage product, it is about advising if a particular purchase type is right for a client.
Working within shared ownership, we fully understand that it works for some but not all, because we fully understand the scheme and all it entails.
We also know every mortgage product there is, the implications of those and how they will affect the clients long term when they are in conjunction with a purchase of this type.
Shared ownership is different to open market, as Help To Buy is, as buy to let is, as equity release is – they are all specialist areas that deserve specialist advice.
Even a standard open market purchase is a specialism.
It scares me when I listen to a non-specialist talk about my specialist area and pass judgement on it, make assumptions and, quite frankly, get it wrong.
Is that person going to give a customer the best advice on something when their own knowledge is limited?
We should pick an area, and work on that. It’s the best advice for clients at the end of the day.
We should know our chosen area fully and advise based on fact and knowledge, rather than looking for a quick win and not looking at clients’ needs fully.
Complexity in the mortgage market is certainly growing from new build to later life lending and there is a lot for brokers to keep up to date with.
Some might choose to specialise in a particular area, but this shouldn’t stop those who want to have a holistic view.
The new build market has seen one of the biggest changes in recent years, with more than 20 lenders now operating within the industry.
The latest government housing supply statistics showed a total net supply for 2016-2017 at 217,350 – the fourth successive rise since 2013 and we expect the number of lenders operating in the new build sector to rise with this increasing demand.
There are plenty of brokers who will not specialise in new build but will be writing considerable amounts of business in this sector.
This provides a huge opportunity for brokers, specialist or not, and there are plenty of ways to get involved.
Brokers keen to examine the opportunities that new build provides should get in touch with their local estate agents and developers to find out what is going on near them.
Often local builders won’t have a preferred broker and might rely on regional contacts, this presents brokers with a good opportunity to break into new build at that level.
Additionally, following the Right to Build legislation introduced in 2016, this could result in further opportunities for brokers to consider the emerging market of self and custom build.
Engaging with their mortgage club and attending industry events is also a great way to ensure that they are aware and on top of the latest industry trends, innovations and regulation.
Utilising lender business development manager contacts that specialise in new build is another good way to broaden general market knowledge outside of just products and policies.
The underlying message is that as the mortgage market continues to become multifaceted, brokers shouldn’t see themselves as locked out of these new opportunities.
Brokers should look to embrace new areas, helping more people onto the property ladder and expanding their expertise into new and exciting areas.
Jeremy Duncombe, director of intermediary distribution at Accord Mortgages
With the current government focus on building new homes and addressing the housing shortage in the UK market, there are many new developments springing up across the country.
This drive to provide much-needed housing has been further boosted by government funded schemes such as Help to Buy, providing greater opportunities for first-time buyers and those wishing to move up the ladder.
These new homes not only provide additional availability and choice for borrowers but, being built to the standards of modern building regulations, they are more energy efficient than older properties and should require less maintenance.
For lenders, this increase in the availability of new build properties presents a clear opportunity to help more people seeking to move out of rented property into a home of their own, as well as supporting those who want to live in a modern home with the benefits this brings.
Lending at higher loan-to-value (LTV) to first-time buyers and movers choosing to use their equity to finance larger homes helps lenders to manage the risk profile of their lending. It also balances the inherent risk of having more higher LTV lending on your books against the opportunity it brings to create revenue for reinvestment in a building society like ours.
Historically, valuations were less transparent with developers often including incentives which made accurate assessments more difficult.
These are now fully disclosed, so the true value of the property is much clearer but there is still the perception of a “new build premium” which lenders and valuers need to consider.
Additionally lenders need to be mindful of their exposure to a single development site, and the fact that a plot of land is more difficult to value than an established property is another factor in the mix.
Although new build does present these risks to borrower and lender they are manageable, and overall any increase in the availability of high quality affordable new homes has to be a good thing for everyone.