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New build lives on despite death of Help to Buy 

by | Feb 26, 2024

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By Richard Harrison, head of mortgages, Atom bank 

It would have been easy to assume that new build sales would fall off a cliff after the closure of the Help to Buy scheme. 

There’s no doubting the effectiveness of the initiative in supporting the new build market – from the launch of Help to Buy in 2013, more than 387,000 newly built properties were purchased with the assistance of the scheme. In total that’s £109 billion-worth of homes where buyers were provided with a helping hand through an equity loan from the Government. 

 
 

The removal of those loans has obviously had an impact on the ability of would-be buyers to purchase such homes, coupled with the significant increases to interest rates on mortgages over the last year or so. Given this situation, it would be understandable if the new build market had closed up shop, and yet the reality is rather different, with the market still in relatively decent shape. 

At Atom bank we have seen a consistent level of demand from buyers, ranging from both first-time buyers to second steppers, in new build homes, and we know that many brokers have seen the same. 

Indeed, even with the absence of the Help to Buy scheme, Savills has suggested that demand for new-build homes among first-time buyers in particular has been resilient to a “surprising” degree, with first-timers continuing to account for around a quarter of new-build sales. 

 

Why buyers still want new build homes 

There are some easy to understand reasons for potential buyers being attracted to new-build homes, even without the Help to Buy scheme in place. 

For starters, newer homes tend to be more energy efficient, and with energy bills such a consistent concern, the option of securing a property which will not result in money being wasted as a result of poor insulation is a powerful one. 

It’s not just the energy bills though, but the general maintenance tends to be more cost effective on newer homes. The reality is that as a property ages, more things go wrong, driving up costs for the buyers. By contrast newer homes are usually less of a concern when it comes to the cost of upkeep. 

The absence of a housing chain can be a huge selling point too, potentially allowing the buyer to secure the property more quickly, and in a less stressful fashion to boot. 

All of these elements are going to ensure that demand for new-build homes remains strong. 

The return of confidence 

It’s also worth reflecting on the improving state of buyer confidence. It’s no great surprise that rising mortgage rates, combined with the persistently high rate of inflation, had an impact on demand from potential property purchasers, whether they were looking for older homes or newly-built ones. 

That drop in demand then fed into the declines seen in average house prices. 

Yet we have seen the various house price indices reporting month-on-month price increases of late, as confidence begins to return among would-be buyers. Mortgage rates have settled, as has inflation, with the prospect of base rate falls on the horizon. 

With developers increasingly having to price their units more competitively in order to conclude deals, it’s likely that brokers will see a growing interest in new-build homes from their clients in the months ahead, so it is worth pinpointing the lenders best placed to support those borrowers today. 

Working together 

The end of the Help to Buy scheme has clearly reduced options for would-be purchasers of new-build homes, but there remain a host of lenders who are keen to work with borrowers in this sector. 

At Atom bank for example we are proud to stand apart, delivering lending at up to 90% LTV for new-build houses and 80% on new-build flats and apartments. We also offer six month offer validity as standard, which can be extended by a further six months for new builds if required. That is backed by a common-sense approach to applications, combining cutting edge technology and experienced underwriters to ensure that cases are assessed properly and offers are delivered quickly. 

Ultimately it all comes down to partnerships, to understanding each other. Brokers understand their clients and what they are looking for, and by working closely with advisers, lenders are better able to deliver the products and services that meet those needs. That’s as true of new builds as any other area of the market. 

The reality is that if brokers and lenders work closely, listening to each other and providing support where needed, then in the end it’s the client that benefits. With the Help to Buy scheme now a thing of the past, those partnerships are more important than ever for would-be buyers of new-build homes.

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