Mortgages  

Lender updates criteria to include S106 agreements

Leeds Building Society is changing its lending criteria to help borrowers whose properties are subject to Section 106 agreements, with effect from the start of December.

According to Leeds, currently very few mortgage providers will lend on properties affected by these agreements, which limits choice for home buyers and homeowners affected by the obligation who want to remortgage.

A Section 106 is a type of restrictive covenant, typically used to provide a sustainable solution to local housing requirements, such as provision of affordable housing in London where ownership may be restricted to people living within a specific distance of the development, or subject to a maximum salary criteria specified by the local planning authority.

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Leeds’s change to its criteria will apply across its whole range of mortgages, including shared ownership.

Martin Richardson, the society’s general manager for business development, said the agreements were increasingly becoming a common feature on new-build properties.

“We are always seeking to innovate and find new ways to respond to demand, particularly in under-served markets such as this, where the number of borrowers likely to be affected is sure to grow.

He explained: “In addition to applying to brand new properties, Section 106 can affect an existing property - at present, prospective home buyers or affected homeowners looking to remortgage to a better deal have very limited choice.”

Kevin Belsham, UK sales and marketing director for developer Taylor Wimpey, commented: “At present there is a significant lack of banks and building societies prepared to lend to customers wanting to buy affordable properties.

“Today’s announcement from Leeds Building Society is a step change in the right direction, highlighting its proactive approach to engaging with housebuilders and mortgage brokers to offer mortgages that meet our customers’ needs.”

peter.walker@ft.com