With a number of lenders having already pulled back from the new build market following concerns over mortgage fraud, and the continued liquidity crisis placing further strain on lenders’ mortgage books, James Carter, IFA at Independent James, admitted that lenders had become ‘jittery’ about lending on new build flats.
He said: “Lenders have really tightened their criteria on new build flats. With sub-sales in which the property is bought by a group of people and then sold on, some lenders are only valuing the properties at the initial purchase price. Mortgage intermediaries are having a nightmare in placing cases of this type.”
Carter added that in some instance, lenders had downvalued on the agreed purchase price, which left borrowers with the decision to walk away or find extra funding.
With the government suggesting that it plans to build an extra three million homes by 2020, at a rate of over 200,000 a year, Alan Lakey, senior partner at Highclere Financial Services, claimed that even if borrowers were interested, it could be very hard to find a lender willing to lend on the property.
He said: “Lenders are very sceptical of this market and borrowers can only get deals if they have a 25 per cent deposit. Flats are typically bought by first-time buyers but they often don’t have a deposit of this size, whereas keen buy-to-let investors do. I can understand the wariness over the new build sectorsector, but 15 per cent should be enough.”
He added that sub-sold properties would see a reduction in price which could impact the wider market.
Lakey explained: “If properties are re-sold after a few months then there is the element that it is not considered a completely new property, which will then have to be reflected in the price. If these prices go down, then this could set a downward trend for the rest of the market.”
