The UK housing market is overheating right now, as people scramble to buy houses with gardens, where the micro-managers of the State cannot control your every thought and action. Houses with driveways also offer some people the chance to own an electric car in the future, whereas those who live in terraced houses will find themselves forced onto public transport or e-scooters by 2035. Fleeing the Grand Theft Auto lifestyle in many UK cities for a duller, but safer life, in a new build suburb is also quite appealing for many people.
So there are lots of reasons to buy a new build 3-bed semi, or a detached with garage, if you have a high income. But what about that pesky 10-20% deposit that many lenders want, due to KYC and affordability tests? Well, insuring the risk is one way around it which is especially helpful for those people who DON’T have Bank of Mum & Dad behind them.
Gallagher Re, the global reinsurance broker, today welcomed the “vision and confidence” demonstrated by Newcastle Building Society as it became the first lender to go live with a 95% loan-to-value (LTV) product range for new-build properties, thanks to an innovative new reinsurance-backed scheme created by and for the house building industry to address a gap in the mortgage market.
Gallagher Re – which worked in partnership with the Home Builders Federation (HBF) to devise and administer the scheme on behalf of its members – applauded the house builder community for its “cross-industry collaboration” in leading the development of a new, long-term, sustainable solution to address an ongoing issue: the lack of availability of high LTV mortgages for new build properties.
‘Deposit Unlock’ is backed by 17 HBF house builder members – responsible for more than 60% of new UK house production – with over 20 mortgage lenders engaged in the project. Many are expected to go live with their own 95% LTV mortgages for new builds in the coming weeks and months.
Steven Rance, Managing Partner of mortgage indemnity reinsurance at Gallagher Re, said: “At a time when successful government interventions like Help to Buy, which have supported low deposit buyers, are being phased out and raising a deposit remains the single biggest barrier to realising the dream of home ownership, the house builder community stepped up to the challenge.
“For the past year, the HBF has worked with us to devise a scheme that will substantially increase access to new build ownership, backed by reinsurance and supported by mortgage providers. It is a fantastic example of cross-industry collaboration bringing house builders, lenders and the insurance industry together for the common good.
“With the insurance indemnities effectively funded by the house builder community, Deposit Unlock is a long-term, commercial and sustainable solution that comes at no cost to the tax payer and significantly reduces the risk for lenders – essentially unlocking the return of 95% LTV mortgages in the new build space.”
Commending early adopter Newcastle Building Society, he added: “Right from the very start of the project, Newcastle Building Society demonstrated vision and confidence in backing the development of this innovative new scheme by the Home Builders Federation and its members. And having worked closely with them during its development, we are delighted to see Newcastle now go live with their first product rates, bringing the scheme to fruition and spearheading the way for many other lenders to follow suit.”
Tom Wakefield, CEO designate at Gallagher Re, said: “Pushing the boundaries of innovation and creating risk transfer solutions that facilitate commerce, growth and progression is what Gallagher Re does best. Deposit Unlock is a case in point.
“What Steven and his team have helped create – as well as raised and placed the reinsurance capacity to sustain – is a highly collaborative and commercial solution that meets the needs of house builders, lenders and low-deposit home buyers alike.”
He added: “This project underlines the key role that insurance can play in addressing important social challenges and enabling change. And it is testimony to the skills, experience and expertise of a team that has a superb track record in devising and delivering critical mortgage solutions, both in the UK and internationally, during times of both global financial crisis and economic boom.”