Have Self Build Mortgage Rates Gone Up?

This article is written by Mike Pawley who is the MD of Mayflower Mortgage and Finance, the leading Finance Broker within the self build arena and a partner of the National Custom and Self Build Association. 

Answering the question of “Have Self Build Mortgage Rates Gone Up?” is subjective depending on the lender and the product. In this article we will help shed some light on the main areas of concern given the current economic climate

Lets start with the positives. Self Build Mortgage rates are at their most competitive in comparison to standard mortgage rates in over a decade. At the time of writing, someone buying a completed property at 66% loan to value would expect to secure a fixed rate starting at 5.09%. In comparison if you were looking to secure a self build mortgage product with the same loan to value, you could secure a rate starting from 4.09%.

If we use the above comparison and over lap this with a similar example based on the mortgage market 12 months ago. You could expect you secure a fixed rate from circa 1.35% on a standard property. The cheapest self build mortgage rate at the same time was 3.25%. Given the current climate some would argue now is the best time to self build , particularly if it means shedding your more expensive standard mortgage.

Self build mortgage finance in the main is offered on an interest only basis and monthly payments are only made on live funds rather than the whole balance. Which only compounds the cost comparison advantages to standard products in the current market.

Although the finance for building at present is comparatively advantageous , we have clients who have voiced concerned about the housing market and material prices. It’s true Mayflower have seen our average self build price per square meter move from £1495 in 2020 to £2109 per square meter in 2022.  Although, it worth noting we have also seen an uplift in valuations of completed projects over the same period. At Mayflower we’ve helped combat any rises in budget during the build by factoring in a 20% contingency budget when securing finance for all of our clients.

The consensus is that the housing market will have an adjustment of between 10-20% in the next 18 months from the highs of 2022. For self builders , lenders want to see 25% equity within the completed property so any market correction falling within the above would be absorbed and leave the client in a positive equity position.

It’s fair to say that there are strong economic head winds ahead, however the average person looking to self build is fairly insulated if the project and finance is set up appropriately. At Mayflower Mortgage And Finance we help hundreds of self builders every year mange the finances for their projects.  If you’re thinking of self building but the tabloids have got you doubting whether your dream is achievable please book a call and let our self build experts give you the informed analysis of what is  feasible

https://www.mayflowermortgage.co.uk/booking