I decided to take a look at New Build this month and to look at this topic in the context of what’s currently going on in the wider environment, and what this means for our industry and brokers, in particular. I am deeply passionate about the role that new build has in the lives of brokers. I can honestly say that if I was a broker myself its definitely something I would be ‘jumping on’ right now…
A new Labour government, and their promises to reignite the UK’s housebuilding sector, brought a wave of optimism to what has been a very flat 2024. The new build market in 2023 made for gloomy reading. In 2023, there was a decrease in new home registrations—the process by which a developer registers their intent to build a new home—to 105,449, compared to 189,009 in 2022. (NHBC). As we say goodbye to summer, it feels as if the new build housing and mortgage markets are starting to warm up for a busy end to the year. Rates are starting to come down and lenders are looking at ways to support brokers with criteria and proposition enhancements which has been great to see. We are yet to see if the government’s target of 300,000 homes to be built each year will come to fruition, but I am confident that, as a combined and cohesive industry, we are ready.
It’s clear that we need housebuilding to be firing on all cylinders to reach the target set out by the Chancellor—50% higher than the previous 200,000 homes per year target, which was never met. Darlington Building Society fully supports the government’s objective to ease the housing crisis. So what are the key factors which will determine if this ambitious target becomes a reality?
Local Homes for Local People
Section 106 deals have become an increasingly important mechanism for funding and providing new affordable homes. When approving sites for new build homes, local authorities are insistent on Section 106 houses which offer discounted prices for local people.
As registered providers (RPs) have drawn in their horns, the first casualty appears to have been the homes they buy off private developers built under planning agreements with local authorities. In the past couple of months major housebuilders have sounded the alarm on this issue in different ways, making clear that it has the potential not just to hold up delivery of affordable housing, but all housebuilding. (www.building.co.uk Joey Gardiner 22 August 2024)
Self and Custom Build
In my opinion it would be risky to ignore the part Self and Custom Build will play in meeting this challenging target. With 1 in 3 people considering building/commissioning their own home (NaCSBA) the scope to amplify housebuilding rates with self-build is huge.
Sites such as Graven Hill in Oxfordshire perfectly set out how affordable and realistic self-build developments can thrive, with a diverse range of self-build homes on a scale of budgets. This type of development supports independent self-builders whilst contributing to that all-important target, and I’d love to see something of this kind in my own north-east heartland.
Self-build also drives diversification of housing stock to provide future generations with a range of architecture alongside out-of-the-box mass market homes.
Darlington Building Society supports the previous government’s Help to Build initiative and is encouraged that it looks set to continue with the new government. Continuing to provide financial clarity and reassurance for people embarking on a self-build journey for the first time.
Affordability
Like any economic scale, supply and demand drive house prices up and down—and with it, affordability. For those first time buyers wanting to get onto the property ladder affordability is key. Over two thirds (68%) of people consider the affordability of monthly mortgage repayments as a growing barrier to owning a home. (Property Tracker, June 2024).
The role of shared ownership
Shared Ownership is key to the success of reaching the 300,000 homes target, particularly if said homes are to be fully occupied. The opportunity to pay a mortgage on your share of a brand new home, paying the rest in rent, could truly tackle housing shortages and affordability challenges in the current cost of living crisis.
Rate Reducer Mortgages provide another workable solution to this increasing consumer affordability challenge.
Housebuilders typically offer up to 5% of the value of the property as an incentive to buyers, such as cashback or as a deposit contribution, to people buying new build homes. For rate reducer mortgages, this is instead invested into the mortgage to lower the interest rate during the fixed-rate period, unlocking a more affordable mortgage with lower monthly repayments for the initial term.
We recently partnered with Own New to launch a Rate Reducer mortgage. First time buyers and home movers alike can enjoy the economic benefits of buying a new build home while maintaining affordable monthly repayments, with as little as a 5% deposit. Additionally, newer homes are more economical to run; therefore, the financial benefits of owning a new home with Rate Reducer mortgages often extend far beyond lower monthly mortgage outgoings.
Our Own Role to Play
At Darlington we certainly haven’t had our feet up on sun loungers over the summer (!) and I am proud of the ways in which we have been working with brokers to contribute in various ways to the government’s housing crisis and building targets through diversifying our product range, changing our criteria, amending our affordability model to better fit a changing market and our commitment to delivering a better service based on our broker feedback.
The future for new build certainly looks to be brighter and for brokers the time is now to jump on the bandwagon before it leaves town!
You can contact our brilliant Intermediary Support Team on intermediaries@darlington.co.uk
or call 01325 741 004
Chris Blewitt
Head of Mortgage Distribution
Darlington Building Society
