Self-build mortgages are increasingly becoming an untapped source of business for UK mortgage advisers. Recent research from Ipswich Building Society reveals that over a third of UK adults (35%) are considering a self-build project at some point in the future.
There are many aspects that encourage those looking for a new home to build their own. 51% of respondents were attracted to a self-build option because it provides the ability to specify the layout. 28% said that being able to make environmentally friendly decisions during the process appealed to them, and 17% cited economic or financial benefits as a key factor in their decision.
But there was one aspect of self-building that almost half (46%) of respondents saw as a major challenge, the financing of the build, and indeed 72% of those wanting to build their own home didn’t realise they would require a specialist self-build mortgage.
What’s different about a self-build mortgage?
A self-build mortgage is designed to suit the elongated process of building a new home which is usually completed in various stages. Therefore, funds are released to the client to try and tie in with the completion of each stage rather than a lump sum being offered up front, as happens with a standard residential mortgage. This is ideal for situations where the client has a lump sum ready as a deposit for the land to be built on, as well as the first stage of the build.
And it’s not just new build projects that can benefit from a self-build mortgage, they can also be used for:
- Demolish and rebuild projects
- Mid or partially built projects
Self-building in the UK
The size of the UK self-build market is estimated to account for between 7% and 10% (12,000 homes per year) across the UK. This is supported by data from the National Custom & Self-Build Association (NaCSBA) that shows the number of self-builds growing steadily since the introduction of self-build registers in 2016 to a total of 15,902 in 2019.
Whilst the NaCSBA data shows that the UK is lagging behind much of Europe with self-build accounting for 80% of new homes in Austria and 60% in countries such as Sweden, Norway, Italy and Belgium , the government’s Right to Build Scheme, passed in 2016, could result in a yearly increase of some 35% in custom and self-build properties. Additionally, the Right to Build Scheme allows local authorities to make more plots available to self-builders, making it easier to find that perfect location, although the average price of a plot can vary drastically throughout the UK with a few miles making a huge difference. For instance, a plot in Portsmouth could sell for around £371,250, whereas just down the road in Southampton, the average price for a plot could be £156,666. And a plot in Liverpool could set a self-builder back more than £800,0004.
Building plots are also now easier to come by with brownfield sites being made available. These are areas of land previously developed for commercial, agricultural, or industrial use, and local authorities now hold registers of brownfield land suitable for housing. Ipswich Building Society’s research showed that 31% of potential self-builders were not aware of this, although 61% said it would help them find a plot once they were made aware of brownfield sites.
Finding the right self-build mortgage
Of course, for a mortgage adviser, finding a specialist self-build mortgage for a client can be time-consuming. It could mean hours on the phone to a variety of lenders, with no guarantee of finding the perfect product for a client.
That’s where Criteria Hub can make a world of difference. It has over 50 criteria relating to self-build, plus a range of questions that assist with the applications, making the process quick and simple with just a single search of over 70 lenders required. This means an adviser can find what maybe once was considered to be a niche product just as easily as an everyday residential or buy-to-let product.
Whatever type of mortgage you need to find, Criteria Hub delivers many benefits:
- Match criteria from over 70 lenders for both residential and buy-to-let
- Over 30,000 criteria to compare
- Ability to flag criteria that are critical or a deal-breaker
- 1000s of additional criteria not found on lender websites
- Standardised terms make it quick and simple for lenders to update their criteria
Maybe it’s time to look at Self-build clients and start laying the foundations for boosting your business? To find out more about Criteria Hub email firstname.lastname@example.org or simply register to become a Criteria Hub user with a 30-day free trial.