Housing minister Grant Shapps is calling on mortgage lenders to back a ‘self build revolution’ by lending more to those wanting to build their own home.
In a letter to mortgage lenders, following discussion with industry and the Building Societies Association, Shapps said he wants to see more people building their own homes and he urges lenders to make more specialist finance products available for self builders.
Shapps pointed out that few people realise the self-build movement provides more homes than any individual housebuilder, but is still far smaller than in many other countries. He believes the self build sector could double in size over the next decade.
Lenders often shy away from the self build lending market due to the higher perceived exposure to risk, but with typical interest rates on self build products at around 6%, Shapps says that the self builder is an attractive prospective customer. With the self build market relatively undeveloped it provides an opportunity for lenders to tap into a new sector.
And he says that lenders should not be put off by self build development as the majority of projects are not “DIY builds” but involve professional builders, architects and project managers.
Shapps said that lenders could make more widespread use of indemnity insurance and ‘build out’ cover to mitigate the risks of self build projects not being finished. He also cited experience from one specialist self build intermediary which indicates that of the 15,000 funded self-build projects started over the past decade, less than 50 have been repossessed.
Shapps said: “Self builders deliver affordable, greener and more innovatively-designed homes; and make a big contribution to the number of new homes built in this country, yet there is scope to significantly increase the number of self built homes in the UK – both for individual households and for community-driven projects.
“I want to create a self build revolution where building your own home is not just the preserve of the privileged few and as the mortgage market continues its recovery, lenders have ideal opportunity to diversity lending into areas such as this. With expert knowledge from established intermediaries lenders can make a profit at low risk.”