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What's changed in the New Build mortgage market?

Since Legal & General launched its New Build Club in January 2014, we've engaged with key stakeholders across the sector, working with builders, housing associations, lenders, surveyors, mortgage brokers, mortgage trade bodies and the Home Builders Federation, with the aim of creating a more sustainable new build mortgage market. In the last two years we've seen this market go from strength to strength, as more lenders take advantage of Government home ownership schemes and new build properties.

Previously the market was characterised by a lack of competition amongst lenders and limited product innovation. Lending was mostly limited to the High Street providers, and even then many lacked specialist support such as a dedicated new build desk. Ultimately, this left those who failed to meet their lending criteria out in the cold.

Now, the market is increasingly complex and competitive, thanks in part to a plethora of Government initiatives and an increasing focus on housebuilding from politicians. Construction numbers across Great Britain are currently in the region of 170,000 homes per annum; however research suggests that in order to meet demand and tackle increasing house price inflation we need to build in the region of 300,000 homes per annum. It is too early to understand all the implications of the Brexit vote for house builders. However, it is clear that after decades of undersupply the fundamentals of the market remain the same, we face an acute housing crisis and demand for new homes will remain high.

We estimate the current value of the intermediary market for new build now sits at roughly £18bn, this has incentivised lenders to improve their propositions for the market however, more can always be done.

Several lenders are now including extended mortgage offer periods, increasing loan to value limits and accepting builder incentives. There is also improved systems and support which accelerates the mortgage process. Greater participation in the Government's Help to Buy scheme has also been encouraged, with 18 lenders reporting Help to Buy completions in December 2015, and some launching products in line with the initiative.

We're also seeing more lenders including Santander, Barclays, NatWest, Virgin Money, Leeds, Skipton and TSB, embracing the new build market and providing a strong boost. Meanwhile, specialist lenders such as Aldermore and Precise Mortgages, are disrupting the market by catering to borrowers who would fail to meet the criteria of High Street lenders.

Growing competition is encouraging more lenders to seriously consider the new build sector, allowing increasing numbers of borrowers to secure a mortgage. Legal & General has grown its share of the market substantially since 2014. By working closely with lenders and brokers, our business saw new build completions of £4.1bn in 2015, up by 51% on the previous year. 

However, whilst we welcome this growth, the abundance of Government home ownership schemes makes the new build market far more complex. To help advisers with this task, Legal & General has created a Government Schemes Matrix, providing an overview of the schemes and the participating lenders. It's crucial that borrowers' decisions are not only driven by sentiment, or the charm of a shiny new home, but by the valuable advice of a specialist new build broker.

Craig Hall, New Build Manager, Legal & General