"Santander won't touch it. HSBC won't touch it. NatWest won''t touch it," says broker
According to Rightmove, Padstow in Cornwall ranks as the fourth most expensive seaside location in the UK, leaving many buyers struggling to find anything affordable.
In Cornwall’s overheated housing market, local buyers bear the brunt of affordability challenges, as surging demand for second homes and holiday rentals drives property prices ever higher. Paul Blake, director at Sound Mortgage, spoke to Mortgage Introducer to explain how he’s helping local clients secure mortgages in this competitive landscape.
Although local councils have tried to manipulate house prices, using so-called Section 106 agreements, they don’t appear to always be getting the desired result. Blake explained, “We’ve come across quite a few of these cases where Section 106 agreements have both helped and hindered,” particularly for so-called “affordable” homes in high-cost areas.
Section 106 restrictions are intended to keep properties accessible to locals, but they can also create paradoxical situations. For example, a so-called “affordable” home discounted to £800,000 from a market price of £1 million is still unaffordable to most. “That’s not an affordable house,” Blake said.
“Mortgage lenders won’t touch it because, in their eyes, it’s not an affordable house.” Halifax, TSB, and Nationwide sometimes support Section 106 mortgages, but "Santander won’t touch it. HSBC won’t touch it. NatWest won’t touch it,” he added, highlighting the limited financing options left for buyers.
For locals seeking affordable homes, the alternative is often to look at more reasonably priced towns nearby, rather than exclusive coastal spots like Salcombe or Padstow, where celebrity buyers like Gordon Ramsay have further driven up demand. As Blake noted: “The most expensive property ever sold in Cornwall sold there,” pushing average prices so high that “there’s no point trying to make something affordable” within the town itself. Instead, he told his clients to focus on developments just outside these high-demand areas, where prices can be set at levels locals can realistically afford.
Blake believes addressing affordability also requires a shift in government and council views on what qualifies as “affordable”. Cornwall Council currently stipulates that to qualify for Section 106 housing, a household must earn below £80,000, which creates a disconnect, as Blake describes: “If you earn £80,000 between you, you can’t buy a house for £800,000.” This mismatch between income criteria and actual housing costs means more properties are sold to cash buyers, further reducing mortgage options for locals. “If they are going to be affordable houses, they need to be truly affordable based on the average income of someone in that area,” he explained.
Amanda Bryden, head of mortgages at Lloyds Bank agreed: “These pricier areas can result in a lack of affordable homes for first-time buyers, a problem often exacerbated by high levels of second home ownership, meaning that many who have grown up in the area may find themselves priced out of owning their own home locally.”
Recent changes to holiday home tax policies may open opportunities for local buyers, as holiday lets are now taxed similarly to buy-to-lets, making them less attractive as investment properties. “We’ve seen a definite drop in demand for holiday homes and holiday let mortgages,” Blake pointed out, especially with an additional 5% stamp duty imposed. He noted: “post-COVID, everyone can now go overseas for cheaper than coming down to Cornwall, so there’s a lot less demand.” With more landlords now considering selling these properties, Blake anticipates more homes might become available to local buyers, though prices are unlikely to fall significantly in prime areas like St. Ives or Salcombe.
The UK’s most expensive seaside areas
- Sandbanks, Dorset – £1,582,331
- Canford Cliffs, Dorset – £1,242,181
- Milford on Sea, Hampshire – £751,442
- Padstow, Cornwall – £678,058
- Lymington, Hampshire – £603,312
- Barton on Sea, Hampshire – £562,609
- Budleigh Salterton, Devon – £542,005
- Lyme Regis, Dorset – £521,932
- Sidmouth, Devon – £501,099
- Sandgate, Kent – £495,009
Source: Rightmove data
For local first-time buyers, securing a property often means looking a few miles further afield. Blake observed: “If they get, you know, six miles further out, it’s not much of a commute… they’re going to get on the property ladder rather than renting and throwing money away.” Blake also advises would-be borrowers considering creative financing solutions, such as Bath Building Society’s allowance for rental income from letting a room, which can boost mortgage eligibility. However, he acknowledged that this solution may be less ideal for families.
As for the lending landscape, Blake was candid: the restrictive criteria of Section 106 agreements, which vary significantly by council, make it difficult for buyers to secure financing. “The trouble is trying to make a lender do something they don’t want to do,” he explained. Creating a more standardised Section 106 agreement that lenders might universally accept could simplify the process for more buyers. In his view, “What would be easier is one broad… agreement that covers everything, [getting] lenders on board to all accept it.”
Cornwall fast facts
- Population: Approximately 570,300 as of the 2021 Census.
- Average age: The median age is 47 years, based on the 2021 Census.
- Average salary: £31,737 as of 2023.
- Average house price: £299,000 as of August 2024.
- Average rent: £925 per month as of September 2024.
- Total area: 1,370 square miles (3,546 square kilometres).
Photo credit: Dave Pullig – Licenced under Creative Commons 2.0 Attribution (CC BY 2.0)
