Financing Self and Custom Build: the CML perspective Presentation - - PowerPoint PPT Presentation

Financing Self and Custom Build: the CML perspective

Presentation by June Deasy, Head of Policy, the Council of Mortgage Lenders (CML)

About the Council of Mortgage Lenders

• UK-wide trade body representing the first charge

residential mortgage lending industry (banks, building societies and specialist lenders).

• Our 139 members undertake around 97% of all

residential mortgage lending in the UK.

• There are 11.1 million mortgages in the UK, with

loans worth over £1.3 trillion.

• In addition to home ownership, CML members also

lend to support the social housing and private rental markets.

Mortgage lending in Scotland (Q2 2016)

• Home buyers borrowed £2.2bn for house

purchase, totalling 16,500 loans

• First-time buyers borrowed £920m (8,500 loans)
• Home movers borrowed £1.2bn (8,100 loans)
• Remortgage activity totalled £850m (7,100 loans)

Affordability

• Affordability metrics for first-time buyers in

Scotland remains better than for the UK overall.

• The typical amount borrowed this quarter was

£99,800 (£132,800 in the UK overall).

• Typical average household income of a first-time

buyer in Scotland was £33,600 (£40,000 in the UK overall).

• The income multiple in Scotland was 3.03; lower

than the UK average of 3.51.

Affordability (continued . . .)

• Affordability metrics for home movers in

Scotland similarly better than for the UK overall. The amount borrowed this quarter was £139,500 (£167,400 in the UK overall).

• The typical average household income of a

home mover in Scotland was £49,700 (£53,600 in the UK overall) – a 2.84 income multiple (UK average 3.26).

Lending for self and custom build: general considerations

• Property must hold value in medium to long term

to offer security for a mortgage loan.

• Lenders looking for: durability; reparability;

adaptability; insurability; quality; saleability.

• Lenders only one part of the equation: base

decisions on other professions, e.g. valuers, conveyancers, warranty providers, insurers.

• Past poor experiences can influence lender

decisions.

Lending for self and custom build: challenges

• Relatively low demand from mortgage customers
• Perceived higher risks associated with lending on

self-builds in particular

• Higher capital requirements of lenders if lending to

the sector

• Staged payments can act as a disincentive

Lending for self and custom build:

• pportunities
• Building the evidence base:

– How do custom build properties hold their value over time? – How long do self and custom build customers tend to stay in their properties? – What’s the average build out time (from first foundations to completion)?

Lending for self and custom build: Opportunities (continued . . .)

• Alternatives to the staged payments model:

– Innovative schemes to remove the need for lenders to fund the build until completion stage; using third parties such as local authorities to upfront-fund the build.

Next steps

• Enhancing the evidence base
• Sharing insight
• Monitoring innovative developments
• Today’s event a welcome contribution