FTB self-build mortgage in pipeline

Julia Rampen
Written By:
Julia Rampen

The self-build specialist BuildStore is in talks with lenders over a first-time buyer mortgage product.

BuildStore Financial Services chief executive Raymond Connor told Your Mortgage that self-build, especially custom-build where professional developers were involved, could enable first-time buyers with a 5% to 10% deposit to end up with additional equity in the form of a finished house with an 80% loan-to-value.

Should lenders sign up, the product could be available by autumn, he said.

“We are talking to a couple of lenders at the moment. We can leverage the developer profit to help the first-time buyer, particularly in the custom-build area.”

Building societies need to offer self-builders more mortgages including deals which allow them to switch to mainstream residential rates once the building is complete, self-build specialists Buildstore have urged.

Connor repeated his calls for more products to an audience of lenders at the Self Build Lending Workshop today at the National Self Build & Renovation Centre in Swindon on Tuesday.

He said the demand for self-build houses had risen since 2008 and there was an opportunity for lenders to build communities.

“If we take community in its natural sense, it is local lending to be done for local building. I see lenders being able to work together to spread risk and it will require some specialist lending products to see those developments through.”

Lenders could enjoy high margins on self-build mortgages but needed to accommodate the customer’s different needs once the building was complete, BuildStore director of financial services Rachel Pyne argued.

She said: “All the self-build products we have at the moment are long-term mortgages. They are potentially not perceived by the borrower as being long-term mortgages becase they are probably slightly higher rates than high street mortgages.”

Some lenders already offered a transitional product, she added: “Once borrowers get the completion certificate they can switch it onto one of the high street rates.”