New Build, New Business

How mortgages for new-build homes represent a developing market for brokers.

Amid all the uncertainty impacting the UK property market in recent years, one thing has remained constant - demand for housing continues to grow. Regional variations aside, there just aren’t enough homes available to satisfy demand in Britain. And for a whole host of reasons, developers are struggling to bring new stock to the market.

No sign of a significant slow-down

Despite the cost-of-living crisis and recent base-rate rises, we don’t expect demand to fall significantly. In 2022, we saw a massive rise in applications for mortgages - up 36% on the previous year. As for prices, we've written before about record rises. While we may see some correction over coming months, this could be good news for buyers, helping to maintain demand.

Why can’t developers just build more houses?

There are lots of reasons why developers aren’t keeping up with demand. Local planning policy and the availability of suitable land plays a role, but major national and international events have slowed building throughout the country. Brexit has seen a 42% fall in EU nationals working in the construction industry , while the Covid pandemic saw a massive drop in the rate of new home starts in the rate of new home starts in 2020.

Just as developers have been struggling to catch up, they’ve been hit by massive price rises in construction materials - up 24% in the year to July 2022.

While the Government’s Help to Buy scheme has now come to an end, there are still plenty of alternative mortgage products on the market. For brokers, that should be a good opportunity to work with buyers and explore all the options.

Build-time catch puts buyers at risk

While buying a new build has its attractions - not least clarity on pricing - it can have pitfalls too.

We’ve recently seen an increase in developers pushing buyers to sign deeds long before the property is finished. In earlier years this may not have been a problem, but with rising interest rates we’re now seeing buyers - especially FTBs - facing serious issues. Simply put, a mortgage that’s affordable when the deeds are signed could be beyond the buyer’s means by the time they get the keys. In many cases, this will mean sales falling through. Although disappointing, that might actually turn out to be a blessing for some buyers, who might otherwise have been saddled with unaffordable debt for years to come.

We support brokers against pressure from developers

We’ve heard from a number of brokers sharing frustration over the developers’ strong-arm tactics, and we’re firmly on their side:

“The growing incidence of buyers being coerced into signing paperwork too early is simply unfair. It doesn’t do anyone any good, as even the developer loses out when a sale falls through at the last minute. TML stands with brokers across the country in calling for regulation to put an end to the practice.” Chris Kirby – Specialist Distribution Manager

So what does this all mean for brokers

We’re facing some uncertain times for the new-build industry. With development failing to keep up with demand, prices should keep rising in many areas of the country. The cost-of-living crisis has also highlighted the cost of running a property, so we’d expect more buyers to opt for relatively energy-efficient new-build homes over older properties.

While the outlook for new builds looks optimistic, continued volatility could mean significant opportunities for brokers. If your clients find themselves in difficulty, you could ride to the rescue - particularly if you work with a flexible, responsive lender like TML. Our real-life approach means we’ll look at the big picture, assessing each case individually - and we can often help when other lenders can’t or won’t.

We believe new builds will continue to be a great option, especially for first timers. Knowing the final price of a home - and usually a moving-in date - beats the anxiety and hassle of a chain for many buyers.

And whatever happens in the market - for new-builds and any other kind of property - TML will be standing by to support brokers. We’re here to help you help your customers into the homes they need and deserve.