The 95% mortgage: What does it mean for hopeful new build buyers?


From Friday 1 July, the UK’s biggest lender, Halifax began offering a 95% mortgage for buyers opting to purchase a new build. This new offering means more buyers have the opportunity to get on the property ladder and experience the benefits of choosing a new build property. Anne-Marie O’Doherty, regional sales director at Lovell Homes and Scott Howitt, sales director at Chartwell Mortgage Services explain more.

Halifax has announced it is increasing its maximum loan to value (LTV) on new houses from 90 to 95% and extending its availability to include houses built by smaller developers. This means buyers will only need to save five per cent of their chosen property’s value to be able to apply for a mortgage loan. Shared ownership properties will also be eligible.

Why has Halifax decided to do this?

Scott: The timing may seem odd as Halifax has always maintained it is happy with 90% but, with just months until the Government’s Help to Buy (HTB) scheme ends, lenders are looking to source new ways of helping buyers with small deposits. So far, the HTB scheme has helped more than 350,000 households afford a new build with just a five per cent deposit.

Anne-Marie: This shows there is a definite demand for this sort of support, which now Halifax and potentially other lenders are interested in providing. For Lovell and other housebuilders, this is also good news - although plot availability is limited and so, if buyers are interested, they will need to move quickly.

Is Halifax considered a good lender?

Scott: Halifax set out to attain 25% of the market and have achieved that, making them the biggest lender in the UK by far as part of the Lloyds Banking Group. The next in the top six lenders sits at around 12% of the market.

What impact will this have on buyers?

Scott: During the Covid-19 pandemic, buyers using the HTB scheme accounted for approx. 60 to 65% of all transactions in the North West and now accounts for ten per cent of business. We envisage, with this scheme ending, many people who have been able to save money during the past two years, will want to take advantage of this new five per cent deposit option.

Any regions in particular?

Anne-Marie: For buyers in the North West, there will be a significant impact, due to the housing prices in this region. We are currently seeing increasing popularity for our Manchester development The Gateway, which offers high-quality homes in the city, as well as outside space. And for those interested in the hotspot of Salford, our Spinners Quarter development.   Builders in this area are also in a strong position as the market is so active, but we expect to see a surge of business across the UK.

What are the overall benefits of this mortgage?

Scott: Overall for buyers the biggest benefit will be having to save less as well as the increase of choice in what you can afford. Being able to buy sooner also puts the customer in a position of strength, so we expect to see a spike of activity across new build developments.

It’s still important to ensure you check your affordability and discuss with your financial advisor you can afford the rates being set out.

Anne-Marie: Looking at energy performance certificates (EPCs), lenders are also offering better rates for EPC A and B, which you just can’t get with an older property. Eco-efficiency is one of the main benefits to buying a new build and it’s a great push for people to choose a greener home.

Why is the 95% mortgage recommended?

Anne-Marie: This mortgage will inevitably mean you can get a house sooner, which from our experience, we know it can take many years to save up that deposit - particularly first time buyers. Allowing people that extra wiggle room of five per cent will improve chances for many buyers, potentially giving them more choice – especially if they had not previously considered a new build, or a particular region or area.

Scott: It also looks likely that now Halifax has done this, other banks will follow suit offering even more choice – if they choose not to, they risk missing out.

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