David Bexon, managing director of property website SmartNewHomes.com, says that while the flat-pack home will not single-handedly ease the pain of homeownership for first-time buyers, it offers an affordable solution for many putting their first step onto the housing ladder.
“I wouldn’t anticipate any particular problems for first-time buyers obtaining a mortgage for an IKEA home, with a range of specialist lenders currently in the mix. However, with the recent credit crunch, lenders are taking a more cautious approach,” he says. “However, while IKEA offers an affordable solution for some, the scrapping of Stamp Duty for first-time buyers, something we have been campaigning for for some time, would offer a more widespread and immediate relief for want-to-be home owners.”
A straw poll of lenders seems to suggest that most lenders will lend on the timber buildings, but the re-sale covenant and agree valuation mechanism could potentially cause lenders to down-value the properties or not lend on them at all. Until more information is known about the exact terms of the covenant, most lenders can not give a definite decision about where they stand.
“The reality is that the whole concept is a bit of an unknown quantity and although it may work well in another country, this does not necessarily mean it will work here,” says Montlake. “Personally I hope it does, as the whole IKEA living concept is a fresh, relaxed one and soon many of us may by sitting in our outside saunas after work.”
Because the homes are eco-friendly, lenders with a green slant might be a good bet for brokers trying to place a case. Norwich & Peterborough Building Society (N&P) gave the scheme a tentative thumbs-up. Alison Rolls, head of communications at N&P, does not anticipate any difficulty based on the information currently available and particularly welcome applications on eco-friendly properties.
“We try to be as flexible as possible when considering if certain types of construction are mortgageable,” she says. “We want to encourage developers and individual home builders to be innovative, especially if it has environmental benefits. But, of course, we have to ensure that the property is going to have a re-sale value in the interests of the buyer as well as our own.”
Other lenders are reserving judgement for the time being. HSBC said the properties are ‘under technical consideration’ which means the lender needs to know more about the properties – such as build quality, life cycle, materials used – before it will confirm whether it will lend on them.
Halifax says pretty much the same thing; that any lending decision would be guided by the valuer who would be considering issues such as structural soundness, security and re-saleability. As with any new method of construction, the lack of an established re-sale market will make assessment of value more difficult although the bank’s – and other lenders’ – surveyors will be guided by the Royal Institution of Chartered Surveyors.
The Co-operative Bank says it will consider lending on these homes subject to certain conditions and depending on whether the buy-back clause comes with any strings attached.
As for whether the homes provide a solution to the first-time buyer crises, there are a number of factors that have caused this sector to struggle; the failure of salaries to keep pace with house-price growth, student debt and buyers not having a big enough deposit.
“With the credit crunch biting, the lack of products available with high loan-to-values and rising rates of interest are going to make it even harder to get on the housing ladder,” says Bien. “A combination of factors need to improve to help FTBs onto the ladder with parents playing much more of a role going forward.”
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