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Self-build lacks lenders

Brokers feel the Government’s drive to increase the number of people building their own home will fall short due to lenders’ apprehension about this type of lending.

Earlier this month, housing minister Grant Shapps urged lenders to offer more self-build deals after pledging £30m to provide short-term finance to help fund projects where groups of self-build homes are put up at the same time.

Launching the scheme, Shapps said: “The self-build industry is riding the crest of a wave, with more people than ever wanting control over the design and build of their home.

“But despite this self-build surge, we continue to lag behind the rest of the world. I am determined to change this so anyone who wants to embark on a self-build project has the opportunity to do so.”

According to statistics from the Department of Communities and Local Government, around 10,000 of the 100,000 new homes built each year are self-builds.

The Government wants to double this figure. It estimates there are over 100,000 people looking for self-build plots.

But lenders can be sceptical about lending on this type of property as they have little security if the project is not completed. Lenders that offer self-build deals include Leeds Building Society, Lloyds TSB, Cumberland Building Society and Progressive Building Society.

Enness Private Clients director Hugh Wade-Jones says: “The reason this type of finance is difficult to come by is it could go quite wrong if you do not know what you are doing. It is impossible for the lender to determine if the property will get finished and that is why some lenders are put off by it.”

Coreco director Andrew Montlake says: “It is all very well having the idea to build your own house but the realities of doing it and completing the project can be very difficult unless you are experienced. I can understand lenders’ reluctance in getting involved in this type of lending.”

London & Country associate director of communications David Hollingworth believes self-build will continue to be a niche sector as most people will be put off by the hassle.

He says: “There is a place for this but I do not think it will change the housing market. There is nothing wrong with the ethos of helping people build their own house but this is not going to be for everyone and will not be a main-stream thing.”

Hollingworth adds lenders will be less inclined to fund niche lending in the present tough market conditions.

He says: “Is a lender going to be willing to lend on this type of property when we are seeing them stick to vanilla lending?”

Wade-Jones says: “I do not think it is achievable to double the size of the sector as it stands. Planning is an issue, so the sector would be given a bigger boost if planning restrictions were relaxed.”

Others feel the fund pledged by Shapps is too small to be effective.

John Charcol senior technical manager Ray Boulger says: “I do not think the sector will grow to 20,000 properties a year. Unless the Government puts in a lot more money than it is, I do not think it would have any realistic chance of doubling the number of properties.”

BuildStore Financial Services, which specialises in self-build advice, says the extra funding will not help without lenders on board.

Founder and chief executive Raymond Connor says: “It is about products and margin and risk and without the support of lenders, this sector will struggle to get to the next level.”


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