Mortgages  

EU mortgage rules may scupper self-build Budget

The Building Societies Association’s head of mortgage policy said rules in the finalised European mortgage directive could mean lenders err on the side of caution and offer self-build borrowers far smaller mortgages.

Currently self-build borrowers taking a mortgage of £100,000 are likely to receive four or five payments of £20,000 to £25,000 staged as the building work progresses.

This staged payment could be jeopardised by the European rules which would see lenders having to release the full £100,000 up front before building starts.

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Mr Broadhead said this risked lenders potentially feeling they could only offer a smaller mortgage equivalent to just the first staged payment.

He said: “At the moment this is just a risk but it’s vital the industry and regulator work together to make sure Britain can get building which is what we all want.”

According to Mr Broadhead, the FCA plans to announce a full consultation with the industry later this year to decide how to interpret the European mortgage directive wording after which it will publish its own rules on how lenders should implement the changes.

Mr Broadhead added: “My sense is there is no intention at the Treasury or the regulator to stifle the self-build market which gives us some confidence we will find a way through the rules.”

His comments came after chancellor George Osborne announced in today’s Budget that the government will consult on creating a new right to build scheme giving custom builders a right to a plot from councils and a £150m repayable fund to help provide up to 10,000 serviced plots for custom build.

Mr Osborne added: “House building is up 23 per cent. But that’s not enough. It’s why we’re giving people a new right to build their own homes and providing £150m of finance today to support that. We’re getting Britain building.”